Qualcomm executives are betting on 5G to provide a significant opportunity for the chipmaker to bump revenues and earnings in 2019, even as an ongoing battle with Apple continues to impact the company.
On an earnings call this week, Qualcomm CEO Steve Mollenkopf said one of the company’s main priorities for the year ahead is to resolve the dispute with Apple. Licensing disputes are currently being litigated in multiple countries and cost Qualcomm billions in lost royalty payments from Apple suppliers. Apple’s decision to use Intel’s modem in its latest generation of iPhones also had “a significant impact” on Qualcomm’s financial performance, according to Mollenkopf.
Qualcomm recorded $5.8 billion in revenue in the fourth quarter, a 2 percent decrease from last year, but better than expectations. For the full fiscal year 2018 Qualcomm reported revenues of $22.7 billion.
In addition to unlicensed intellectual property infringement claims, Mollenkopf said there “are billions of dollars in damages” in breach of contract claims against Apple manufacturers. Qualcomm expects a trial date for that issue to be set in early 2019.
“We have continued to have discussions with Apple to try and reach a resolution, and we remain focused on driving the appropriate value for our stockholders, either through settlement or litigation,” Mollenkopf said, according to a transcript from SeekingAlpha. “Resolution of the outstanding licensing disputes represents significant value to our shareholders and provides the foundation for very strong earnings growth, separate and apart from the 5G opportunities.”
5G is Qualcomm’s top priority for the coming year, when commercial launches are expected across North America, Europe, China, Japan, South Korea, and Australia. Mollenkopf noted more than 18 OEMs have committed to using Qualcomm’s 5G X50 modem in handsets slated to launch in 2019.
“Our focus and investment priorities over the last couple of years have enabled us to successfully establish a strong technology position and lead the 5G industry transition,” Mollenkopf said.
Executives said the company is also having success in diversifying its product line, including an increased appetite in the auto industry related to telematics, infotainment and in-car connectivity. Mollenkopf said this drove an order pipeline of more than $5 billion, up from $3 billion earlier this year.
“We are leading 5G innovation in cars and have secured the world’s first major 5G design win with a leading automaker, and we are working with numerous other automakers and Tier 1 suppliers to bring 5G to vehicles,” Mollenkopf noted.
Still, Qualcomm has had a bit of a bumpy year that included an abandoned effort to acquire NXP and a hostile takeover attempt by Broadcom.
Just this week a federal judge ruled that Qualcomm must license some of its technologies to rivals. The partial summary judgement is part of an ongoing antitrust lawsuit brought on by the FTC, though Mollenkopf said Qualcomm views the ruling as “incorrect” and expects a full trial to come next year.