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Apple, Qualcomm settle royalty dispute, and Qualcomm is spiking

David Faber
  • Apple and Qualcomm have settled a royalty and patent dispute that went to trial this week in San Diego, California.
  • As part of the settlement, all legal action worldwide between the two companies will be dropped, and Apple will buy Qualcomm chips again. 
  • Qualcomm said it expected a $2 increase in earnings per share and its stock rose over 15%.  

Apple AAPL and Qualcomm QCOM have settled their royalty dispute, the companies announced in a press release.

The settlement includes a payment from Apple to Qualcomm as well as a chipset supply agreement, suggesting that Apple will buy Qualcomm chips for future iPhones. The companies did not say how much the payment will be. 

Qualcomm stock rose over 17% after the news broke, boosting its market cap by about $14 billion to to more than $83 billion. Apple was up less than 1%. Intel, a Qualcomm competitor, sharply dipped on the news before recovering.

Qualcomm expects incremental earnings per share of $2 as product shipments ramp, Qualcomm said.

The two companies started proceedings in a trial in federal court in San Diego on Monday, which was expected to last until May. Both sides were asking for billions in damages. 

The complicated legal battle centered around modem chips and related disputes been raging in courts around the world since 2016. For years, Apple bought modem chips from Qualcomm, but chafed under Qualcomm's prices and requirement that any company using its chips would also pay licensing fees for its patents.

Apple argued that Qualcomm was abusing its position as one of the only suppliers for cellular technology, and Qualcomm contended that Apple was withholding payments that the two companies had hammered out as part of a royalty agreement.

According to Qualcomm, the license between it an Apple as part of this agreement is six years, with a two-year option to extend. It includes a one-time payment from Apple to Qualcomm.

In November, Qualcomm CEO Steve Mollenkopf said that he believed that the two companies were on the "doorstep" to settling. Apple CEO Tim Cook contradicted him shortly after, saying that Apple hasn't been in settlement discussions since the third calendar quarter of 2018. 

New iPhone models released in 2018 used Intel modem chips, instead of Qualcomm's technology. 

Analysts had also worried that the dispute between Qualcomm and Apple could slow down Apple's plans to support next-generation 5G networks. Qualcomm is one of the top suppliers of chips that can connect to 5G networks.

Here is the full press release: 

Qualcomm and Apple® today announced an agreement to dismiss all litigation between the two companies worldwide. The settlement includes a payment from Apple to Qualcomm. The companies also have reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement.

This story is developing. Please check back for updates.

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