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Qualcomm accused of illegal scheme

Apple sues company over patent loyalties

Apple has sued Qualcomm, accusing it of monopolizing the market for chips for wireless devices and withholding $1 billion in retaliation for cooperating with South Korean antitrust authorities, according to Bloomberg News.

"Apple is demanding Qualcomm hand over money that was supposed to be a rebate for licensing fees," says Bloomberg. Qualcomm is holding back the money as punishment for Apple cooperating with Korean antitrust regulators, according to a complaint filed in San Diego.

"Apple also wants back some of the billions of dollars it claims it was overcharged in 'Qualcomm's illegal scheme' to control the market for mobile phone chips," says Bloomberg.

Qualcomm stock fell 2.4 percent to $63 yesterday (January 20).

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sell before the commerce dept announces they are being investigated for selling unlicensed tek to china

Ponzi: Qualcomm stock plunged $8.00, or 12.72 percent today, to $54.88. It's a steal now, but you might wait to see if it drops more. There could be more actions similar to Apple's. Or more countries could try to impose hits on the company. Best, Don Bauder

It seems to me that Apple is joining forces with Korea and China to try and renegotiate royalties paid to Qualcomm. Apple and 300 other manufacturers have signed agreements to those royalty rates. For CDMA phones Qualcomm receives a rate (2%-4%) based on the sale price of the phone, not just their chip. If the phone has a camera or VR technology and sells for more, Qualcomm gets more. Apple would argue that Qualcomm doesn't deserve a % for the camera or VR. I would argue that without Qualcomm's technology, their device with cool features is just an iPod that can't communicate.

I don't quite agree with your last argument.. There are plenty of wireless modulation methods, coding techniques, power management techniques, etc - that QCOM had nothing to do with. CDMA is probably more spectrally efficient than other modulation methods but it's definitely not the only way to send data. WIthout QCOM technology their device with cool features would be a device with cool features with slightly worse performance and battery life.

You are correct, Apple could have chosen another technology, and would have never gained customers on Verizon and Sprint's networks. However, they choose to enter an agreement with Qualcomm to use CDMA. They signed the same agreements that 300 other manufacturers also agreed to. Now they want to renegotiate. I hope Apple/China/Korea lose on this one, but my bet would be a closed door settlement.

Sounds to me like Apple believes QCOM is the one who wants to renegotiate on signed agreements.

ImJustABill: That interpretation is shaky. Best, Don Bauder

ImJustABill: You seem to suggest that CDMA's days may be numbered. i don't know if that is true, but this is one reason I don't buy tech stocks. They are sent to the sky because of one innovation, but could lose altitude quickly when some other company comes up with a better mousetrap. Best, Don Bauder

No I don't think necessarily think CDMA's days are numbered but I just think hillclimber's inference that an iPhone with QCOM is nothing more than an iPod was innaccurate. Or maybe it was intended to be hyperbole and I'm just splitting hairs.

I'm just saying that it's not like we wouldn't have cell phones, wi fi, etc. without QCOM. QCOM technology is not necessary for any of those things - to the best of my knowledge. QCOM has invented some ways to transmit and receive data more efficiently than other techniques but that doesn't mean the other techniques don't work.

ImJustABill: Since about 1 percent of Qualcomm's business is in the U.S., it's clear that Qualcomm wasn't the only innovator in this business. Best, Don Bauder

1% ??? Is that a typo?? I don't get it.

ImJustABill: It's not a typo. It is right out of Qualcomm's annual report to the SEC (10-K) for the fiscal year ended Sept. 25, 2016, to wit: "Consolidated revenues from international customers and licensees as a percentage of total revenues were 98%, 99%, and 99% in fiscal 2016, 2015, and 2014, respectively." Best, Don Bauder

Interesting. That's kind of shocking to me actually. Is Apple officially considered an international customer (due to some kind of tax strategy?)

hillclimber: This could well be true. If so, there is quite a battle ahead. Best, Don Bauder

hillclimber: If this is true, and the strategy succeeds, Qualcomm has a fight on its hands. Best, Don Bauder

If Apple's allegations are true it sounds like what QCOM did was witness tampering. I would have to assume that's illegal in South Korea.

As an investor I hope this is hyperbole and negotiating tactics from Apple. But if qcom is actually guilty then I would expect them to pay a heavy price for it. Currently I believe Apple has peaked and is attempting to reduce the fiscal impact of an imminent loss of market share. Will be interesting to follow.

hillclimber: Qualcomm is critical to the San Diego economy. Ulp! Best, Don Bauder

Apple might be the more interesting problem to watch here, they have very little opportunity to bring jobs back to make America Great Again. Can you imagine a $600 iPhone going to $1,500? So they will experience pressure from Trump admin.

And iPhone now has the senior citizen marketshare, including my mom. That is anathema to the millennial marketshare.

hillclimber: Apple will definitely get pressure from Trump, who is contemptuous of China.

Trump says bringing corporate taxes down sharply will bring back money that American corporations have overseas, say, through claiming that they have headquarters in a low-tax nation. Right wingers want corporate taxes down to 15 percent. But I believe I am right in saying that Apple pays 2 percent in Ireland. Will that money flow back? (If those numbers are wrong or misleading, please correct me. This is one of the areas where supply side economics came up short. Laffer used to say how much money would flow back from offshore tax havens if taxes were cut. But do you think that somebody who has illegally stashed millions in offshore tax havens for years will bring it back unless he or she is promised amnesty? Best, Don Bauder

Good question. Qualcomm is a good example, something like $30B profit trapped offshore to avoid 35% tax. Qualcomm is trying to buy an offshore company NXP with that money but I would like to see some of it come back onshore somehow.

If Trump can fix as much stuff as he breaks I'll be happy. Previous administrations were restrained by so many issues, bi-partisanship, convention, tradition, facts... Hopeful...

hillclimber: Don't count on Trump fixing anything. Best, Don Bauder

hillclimber: Don't expect this to be concluded in a short period of time. Best, Don Bauder

ImJustABill: The court session should be interesting. Best, Don Bauder

QUALCOMM STOCK REBOUNDS SLIGHTLY. After falling almost 13 percent yesterday (January 23), Qualcomm had a slight uptick today -- up 12 cents or 0.22 percent to $55. The overall market was reasonably strong today. Best, Don Bauder

Apple complaining that someone overcharged them must be quite amusing to anyone who has ever looked at the price of an iPad, iPhone, or Macbook.

Matt101: Apple argues that its products are better -- thus, you're better off with an Apple product even if it costs more. Best, Don Bauder

Apple likes to sue. But I think they will win. Qualcomm is a monopoly. But a necessary monopoly because tehnology is very complicated and somebody has to be the big guy in the room that sets and enforces standards. And that is who Qualcomm is.

Qualcomm asks for punitive payments if the customer also purchases IP or IC from a competitor of Qualcomm.

Apple is just doing the best for their shareholders and trying to recover payments they don't feel were earned.

We've heard from Ponzi, I wonder what Visduh thinks?

hillclimber: Visduh will share his wisdom, I am sure. Best, Don Bauder

Ponzi; I think it is a little early to make book on who is going to win this suit. Best, Don Bauder

QCOM doesn't set standards per se. That's groups like IEEE, 3GPP, FCC, etc. Obviously QCOM has immense influence over these groups but QCOM isn't the only member.

ImJustABill: Apple has clout with organizations, too. Best, Don Bauder

By now I suppose you all know that Qualcomm has similar problems with the Chinese government.

There was some talk earlier about Qualcomm's CDMA technology which made their fortune. CDMA is now a part of other technologies, and within those technologies and CDMA there are new patented elements, some owned by Q, some not, all mixed up in modern smartphones.

Many patents are involved, owned by different entities. Some of them are considered essential for basic functions. Those, under law, are expected to be shared at a reasonable cost with all the players in the field. Apple contends that some of Q's essential patents are being used to extort others. Apple seems to have grounds for their claim and this could spread to other countries.

Additionally, the reason Q sells outside the US is that there are no phone makers here. Nor have we TV makers or kitchen appliances or audio or computers or clothing or eyeglasses or shoes or condom mfgrs.

I tell you all this, not because I understand it, but because I am trying to clarify my own understanding.

swell: Qualcomm does more than half of its business with China. Best, Don Bauder

Apple has a market cap 10 x Qualcomm. In a galaxy far, far away I was a plaintiff in a class action lawsuit against Apple for unfair trade complaints. I was young, the youngest Apple dealer. Apple's lawyer said to me "you file a complaint, we respond. You spend a dollar, we spend $10. Whoever runs out of money first, loses."

The golden rule. He who has the most gold makes the rules.

ImJustABill: Until now, I have only heard that apothegm from gold bugs, and they leave out the word "most." Best, Don Bauder

My version of the saying is, unfortunately, usually true, in my opinion.

ImJustABill: Could be. Best, Don Bauder

Ponzi: This percipient statement does not apply only to Apple. It describes how our legal system works. The lawyer was a bully, but a wise one. Best, Don Bauder

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