Qualcomm Inc. posted stronger than expected results in its second-fiscal quarter earnings report today, but the company’s success continues to be marred by ongoing legal battles, including Apple Inc.’s $1 billion patent abuse lawsuit and the U.S. Federal Trade Commission’s antitrust investigation.
Qualcomm, which is the world’s largest producer of the chips that power smartphones, posted an adjusted profit of $1.34 a share in the quarter, compared with the $1.19 per share predicted by Thomson Reuters consensus. Meanwhile, Qualcomm posted $5.99 billion total revenue versus the predicted $5.89 billion.
The company’s core semiconductor business grew by 10 percent year-over-year with revenues of more than $3.6 billion, and Qualcomm said that this segment did particularly well in new growth areas such as automotive, IoT and networking. Qualcomm also credited some of this growth to the adoption of advancements in mobile technology such as advanced LTE and 5g. Qualcomm’s licensing segment also grew in the last quarter, earning more than $2.2 billion in revenue, an increase of 5 percent year-over-year.
Despite Qualcomm’s strong performance in the last quarter, it was clear from today’s earnings call that both Qualcomm and its shareholders continue to be concerned about the company’s many legal troubles.
Since posting its strong quarterly results, Qualcomm’s shares fluctuated between a 1 percent and 3 percent uptick in after-hours trading. Overall, however, its stock remains at the bottom of a steep slope that began with the start of its legal battles with Apple and the FTC in January.
“Looking across the growing set of new industries embracing mobile technologies, we have more opportunities ahead of us than at any time in the company’s history,” Qualcomm Chief Executive Steve Mollenkopf (pictured) said during today’s earnings call with investors. “Against this backdrop, we have had a series of legal and regulatory challenges that have unfortunately overshadowed otherwise strong operating performance at Qualcomm.”
Mollenkopf said he remains optimistic about the outcome of Qualcomm’s lawsuits: “We have successfully navigated challenges like this in the past, and we have confidence in the sustainability of our licensing business.”
During today’s earnings call, Qualcomm took the time to address each its legal battles directly, and company President Derek Aberle once again refuted the claims made by the FTC and Apple. Regarding the FTC, Aberle said the commission’s antitrust complaint against Qualcomm “fails to state a plausible antitrust claim and offers no facts or economic theories supporting the claim of competitive harm.” Aberle also noted FTC commissioner Maureen Ohlhausen, who is now the acting chair of the organization, strongly opposed the claim when it was filed.
Aberle also rejected the claims made in Apple’s lawsuit, which he said includes “numerous misstatements and mischaracterizations of our agreements, negotiations and contributions to the industry.” Apple’s suppliers underpaid Qualcomm by $1 billion in royalties, the amount that the iPhone maker says it is owed, but Qualcomm said that its revenues have not been affected by the underpayment since the royalties are still reported and acknowledged as owed under its agreements with suppliers.