Daily Management Review

Qualcomm ordered to pay $ 814.9 million to BlackBerry


Manufacturer of processors and components Qualcomm will have to pay Blackberry $ 814.9 million for royalties overpaid by the Canadian company on results of sales of the company’s products. This news has provoked a rapid rise in BlackBerry’s quotes.

Kārlis Dambrāns via flickr
Kārlis Dambrāns via flickr
In February 2017, BlackBerry and Qualcomm entered into negotiations on an arbitration process associated with payment of royalties by the Canadian company in favor of its US colleague under the terms of the license agreement. The Arbitration Commission concluded that such payments were deemed excessive, and now the US company will have to return some of the funds received.

"BlackBerry and Qualcomm have a long history of relationships and we remain technology partners", commented BlackBerry’s CEO John Chen. "We are pleased that the arbitration has decided in our favor, and are planning to cooperate with Qualcomm in the future of security in ASIC and automation solutions."

The final amount, taking into account interest and legal costs that Qualcomm will have to pay, will be named after a hearing scheduled for May 30, 2017. The chipmaker did not agree with the arbitration commission’s decision, however, the payment is mandatory and cannot be appealed.

In recent years, Qualcomm has repeatedly appeared in the center of proceedings involving unfair competition and violations of antitrust laws. Worldwide regulators have accused the company of illegal licensing fees for 3G/4G technology. In China, Qualcomm was fined $ 975 million, in South Korea - $ 853 million. In addition, it may face fines in Europe and Taiwan totaling up to $ 3 billion.

In January 2017, Apple sued Qualcomm in an American court with, accusing it of abusing its position in the market. The smartphone developer claims that the supplier got out of line and violated the antitrust laws by inflating prices for the goods. Thus, Qualcomm refused to return Apple $ 1 billion overpaid to the company.

Qualcomm is the main supplier of LTE communication chips used to connect devices to mobile networks in products of the two largest brands of smartphones, Apple and Samsung Electronics. The orders of these two customers accounted for about 40% of Qualcomm's revenue in the previous fiscal year.

As for BlackBerry, the company began reviewing all agreements on patents after the decision to stop releasing the mobile devices. The company has already sued Nokia for violating 11 patents, and filed a lawsuit against Avaya and Blu Products in August last year. The victory over Qualcomm is very important for BlackBerry against the background of numerous open trials. 

Previously, BlackBerry produced smartphones with its own operating system, but eventually lost the battle to Android and iOS gadgets. One lossy quarter was replaced by another period of financial losses, the company was cutting staff, trying to focus on the corporate sector, relying on the security of its gadgets, but all to no avail - the share of smartphones was rapidly declining. As a result, the management surrendered: the company announced that it would no longer independently produce mobile devices under its brand, but focus on software, becoming, in fact, a software company. And, it seems, the strategy is paying off: BlackBerry began to come out of losses.

According to results of the IV fiscal quarter, the company raised $ 286 million, compared to $ 464 million in the previous year. Net losses decreased from $ 117 to $ 47 million. Operating loss fell by half from $ 114 million to $ 57 million. As a result of the previous quarter of 2017, the company received an adjusted profit against the projected loss. Investors positively took this news: the company's shares rose in price in December 2016 by almost 3%. For the 12-month reporting period, which ended on February 28, 2017, BlackBerry revenue was $ 1.3 billion compared to $ 2.2 billion a year earlier. Losses jumped to $ 1.2 billion from $ 208 million.

According to Canaccord Genuity’s analyst Michael Walkley, Qualcomm's compensation will strengthen the financial position of BlackBerry and increase the likelihood of acquisitions against the backdrop of the company's plans to actively invest in the software business. Walkley raised the target price of BlackBerry shares from $ 8 to $ 9.5. On Wednesday, April 12, BlackBerry shares rose in price by 16%, while Qualcomm securities fell by 3.5%. 

source: cnbc.com