BlackBerry Arbitration Ruling Cuts Into Qualcomm's Profit

By Ted GreenwaldFeaturesDow Jones Newswires

An arbitration decision in a dispute with BlackBerry Ltd. weighed on Qualcomm Inc.'s earnings in the latest quarter, a further blow to its results after the chip maker paid a hefty South Korean government fine the previous quarter, and a reminder of ongoing challenges to its patent licensing business.

The smartphone chip leader reported a profit of $749 million on total sales of $5.02 billion for the quarter, as the arbitration decision cut sharply into the company's top line and helped pull down revenue in its patent licensing segment by 40%, to $1.33 billion. That division, which licenses patents essential to mobile communications and collects royalties on nearly every smartphone sold, typically brings the majority of Qualcomm's pretax net profit. The impact from the BlackBerry decision amounted to $974 million, the company said.

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Overall, Qualcomm reported earnings per share 50 cents, down from 78 cents a year earlier. Adjusting for certain factors, Qualcomm reported per-share profit of $1.34 a share, topping analysts' expectations of $1.19, according to Thomson Reuters.

Qualcomm, meanwhile, worked to quell concerns over royalty payments withheld on sales of Apple Inc. iPhones. It said Apple's contract manufacturers had underpaid royalties during the quarter commensurate with amounts that are currently in dispute.

The question is how much of those royalties will continue to be absent going forward. Qualcomm noted as much in its report, saying it wasn't clear whether Apple's manufacturers would underpay during the third quarter, potentially hurting its revenue and profit.

Still, shares of Qualcomm rose on the earnings beat, climbing 2.4% after hours to $53.85.

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(END) Dow Jones Newswires

April 19, 2017 17:12 ET (21:12 GMT)