Qualcomm takes $1bn BlackBerry bite like a champ, struts away

Patent royalty check dings profits but nothing Snapdragon biz can't handle

Qualcomm is blaming a $974m pile of cash it had to fork out to BlackBerry for huge drops in revenues in its second quarter.

The payment, which stems from legal fees and patent fee charges awarded by an arbitration court, tanked what would have otherwise been a solid quarter.

For the fiscal 2017 Q2 [PDF], which ended on March 26, the Snapdragon designer reports:

• Revenues of $5bn, down 10 per cent year-over-year.
• Net income of $0.7bn, down 36 per cent on the year-ago quarter.
• Earnings per share (non-GAAP) were $1.34, beating analyst estimates of $1.19. Qualcomm's stock is up 2.34 per cent in after-hours trading right now.
• The QCT chip business reported revenues of $3.7bn, up 10 per cent from last year's quarter. The QTL licensing branch saw revenues of $2.25bn, up 5 per cent year-over-year.

The mobile chip designer would probably at this point note that if you look at the non-GAAP (read: Enron) numbers, and exclude the payment to BlackBerry, its business is actually rather healthy rather than staring at a huge profit plunge. Under those circumstances, revenues would be up 8 per cent and net income up 28 per cent.

Thus, Qualcomm argues, this quarter's sea of red ink shouldn't be taken as a sign it is in trouble.

At the same time, however, Qualcomm's legal battles are piling up. The case with Apple over royalties continues to rage on, with a number of Apple's iPhone manufacturers now underreporting their licensing fees at Apple's behest. Qualcomm insists it will be collecting those fees, one way or another, next quarter.

Qualcomm also has pending appeals and legal battles with both US trade watchdog the FTC and the South Korea Fair Trade Commission, as well as authorities in Taiwan and another case with an unnamed customer concerning around $150m in underpaid royalties.

This in turn is causing Qualcomm to issue a wide range of estimates – $5.3bn to $6.1bn, or down 12 per cent to up one per cent year-on-year – for revenues in the coming quarter and reflects the uncertainty Qualcomm still faces with its patent licensing business long-term. Analysts are hoping to see $5.91bn and an EPS of $1.10. ®