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Qualcomm Shares Slide as Apple Dispute Fuels Weak Guidance

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Apple suing Qualcomm over patent royalty payments

The results are of course a bit overshadowed by the matter of its being in a legal battle with its top customer, Apple (AAPL).

"We delivered better-than-expected results in our semiconductor business this quarter, which drove (earnings) above the midpoint of our expectations vs. our April updated guidance", Qualcomm Chief Executive Steve Mollenkopf said in a prepared statement. Wall Street was modeling for fiscal fourth-quarter adjusted earnings per share of 90 cents on sales of $5.48 billion.

83 cents per share vs 81 cents per share expected by a Thomson Reuters consensus estimate. That licensing revenue forecast is below FactSet consensus for $1.52 billion.

The four electronics factories sued by Qualcomm for not paying licensing fees have lodged their own countersuit with the backing of Apple. Even the high end of Qualcomm's forecast, $1.3 billion, came in below analysts' forecast of more than $1.5 billion.

"The contract manufacturers, who were dragged into the fight when Qualcomm sued them separately for payments owed by Apple, are now siding with the iPhone maker to make sure they're not saddled with the fees", the report notes. "This a testament to its improved position in its chip business". Apple sued Qualcomm in January, charging that the chip maker withheld almost $1 billion in rebates owed to Apple in retaliation for the iPhone maker's working with South Korean regulators.

Earlier Wednesday, The Wall Street Journal reported that a number of Apple suppliers are joining the iPhone-maker in its case against Qualcomm. Currently, QCOM is a Zacks Rank #4 (Sell) and is down 2.61% to $55.30 per share in trading shortly after its earnings report was released. It's also filed a complaint with the United States International Trade Commission alleging that Apple has infringed on six Qualcomm patents that "enabled important features and functions in iPhones".

In the USA cases, Qualcomm is targeting imports of iPhones containing cellular baseband processors (the chips that handle radio communications) other than those supplied by its affiliates. Apple has also formally joined the contractor case as a defendant. Qualcomm expects to ship 205 million to 225 million MSM chips, versus 211 million in last year's fourth quarter, and record QTL revenues of $1 billion to $1.3 billion, against $1.9 billion last year.

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