Qualcomm warns ongoing Apple legal row will hit sales and earnings

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Qualcomm is set to take a hefty financial hit after Apple notified the chipset maker it would withhold payments amid the companies' ongoing legal row.

The court case dates back to January, when Apple accused Qualcomm of withholding payments worth $1 billion.

Qualcomm then sought unspecified damages from Apple, claiming the iPhone maker was underplaying the value of their chipsets and had broken agreements.

In a statement, Qualcomm said Apple has revealed it would not be paying manufacturers who make parts of the iPhone and iPad, who then pay Qualcomm under the terms of the licence agreement.

It added no payments would be made until the ongoing legal dispute is resolved.

The chipset maker warned its sales could fall by as much as 21 percent as a consequence and earnings per share by up to 46 percent. It issued new financial guidance as a result of the row, which said sales could be between $4.8 billion and $5.6 billion, down from its previous prediction of $5.3 billion to $6.1 billion.

Earnings per share would now sit between $0.52 and $0.62, compared to its previous estimate of $0.67 and $0.92.

Don Rosenberg, Executive Vice-President and General Counsel of Qualcomm, said: “Apple is improperly interfering with Qualcomm’s long-standing agreements with Qualcomm’s licensees. These license agreements remain valid and enforceable.

"While Apple has acknowledged that payment is owed for the use of Qualcomm’s valuable intellectual property, it nevertheless continues to interfere with our contracts. Apple has now unilaterally declared the contract terms unacceptable; the same terms that have applied to iPhones and cellular-enabled iPads for a decade.

"Apple’s continued interference with Qualcomm’s agreements to which Apple is not a party is wrongful and the latest step in Apple's global attack on Qualcomm.

We will continue vigorously to defend our business model, and pursue our right to protect and receive fair value for our technological contributions to the industry.”

Apple was unavailable for comment.

Ironically, Qualcomm was criticised by the United States's Federal Trade Commission for allegedly charging lower fees to garner exclusivity on Apple's products.

The regulator is seeking a court order to restore competitiveness.