Credit Suisse analysts Phillip Wang, Kulbinder Garcha, and Syed Talha Saleem have said that in the present disagreement between Apple and Qualcomm, there is merit in the arguments from both sides.
Writing in Barron’s, they said: “[We] believe mutual self-interest will prevail, making it unlikely that this dispute will result in prolonged litigation or court trials.”
The article continued by saying that Apple needed Qualcomm because the company’s devices will continue to use the latter’s innovations, both in the case of screen technology and for SEP (standard essential patents).
It was claimed that Qualcomm will have to resolve the issue. In the first place, with the biggest mobile OEM with total hardware income of around $190 billion, Apple is simply too big to ignore. Secondly, given the fact that Apple stands ready to increase its market share in a smartphone market that is not growing as expected, Qualcomm will be anxious to resolve the disagreement as soon as possible.
Wang, Garcha and Saleem continued: “A lack of exposure for Qualcomm means a declining total available market over the next few years. Third, taking this to trial could result in an outcome that affects Qualcomm’s other agreements.”
The trio expressed their conviction that a settlement was indeed possible. They believed that, similar to the agreements between Qualcomm and Nokia in 2008, and between Qualcomm and Samsung in 2009, an amicable agreement that suited both parties was within reach.
The most likely scenario, they went on to say, was a large upfront payment and a significantly reduced royalty rate.
“Apple could digest a payment given its cash balances and would welcome a minimal hit to its gross margin, while Qualcomm would welcome upfront revenues.”
They expect the agreement to involve an upfront payment of around $8 billion and an ongoing rate in the vicinity of $5.90 per phone as potentially acceptable to both sides.