The settlement between Qualcomm and Apple that took place last month, appears to be between $4.5 and $4.7 billion. At least according to Qualcomm's guidance for its third quarter.
Qualcomm announced its earnings today for the second quarter of its fiscal 2019 year, and also announced that it is expecting between $4.5 and $4.7 billion from Apple, in regards to the royalty dispute settlement the two reached last month. That is the first time we've seen a number for that settlement, though there were some estimates that were around $5 billion, which seems to be pretty spot on.
The settlement between these two companies essentially pushed Intel out of the 5G race, as the day after the settlement was announced, Intel then announced it was withdrawing from the 5G race. Considering Qualcomm owned the 4G LTE market, and the only real phones using Intel modems were iPhones, it means that Intel would have zero customers after this settlement between Apple and Qualcomm.
Elsewhere in its earning report, it announced net income of around $700 million, or about $0.55 per share. That was on revenue of $5 billion. These numbers are down about five-percent year-over-year. That is also a slight miss, compared to what analysts were looking for. Analysts were expecting revenue of $4.8 billion and $0.71 earnings per share. It hit the revenue, but missed on EPS. As a result, its stock is down about five-percent in after-hours trading.
Not surprisingly, but shipments were down about 17-percent year-over-year for Qualcomm. Shipping about 155 million chipsets in the quarter. This falls right in-line with what we've seen from other tech giants so far in this earnings season. Where the smartphone industry is really starting to slow, largely due to these phones jumping up to that $1,000 price tag.
Qualcomm's Licensing group, QTL, brought in revenues of around $1.12 billion, that was also a decrease. This time about eight-percent year-over-year. Qualcomm also has around $10.4 billion in cash, cash equivalents and marketable securities as of March 31.
Qualcomm expects these numbers to be roughly the same for the third quarter, stating that it expects revenue to be between $4.7 and $5.5 billion, with earnings per share being between $0.70 and $0.80.
While some companies are depending on 5G to ignite phone sales and bring up their revenue in the next quarter, Qualcomm is not. Which may be a bit surprising, considering it is one of the only companies making 5G modems and chipsets that work with a 5G modem – in the Snapdragon 855. But Qualcomm does know that 5G is still in its infancy, and that it might not be a big seller this year, but it likely will in 2020. The bigger issue for Qualcomm right now is the fact that the smartphone market is slowing and many people are keeping their phones longer. Which means OEMs are making less phones and thus ordering less chipsets from Qualcomm.
The third quarter will be an interesting time for Qualcomm. As that period is usually a pretty dead part of the year, when it comes to smartphones. While we do expect a few new smartphones to be launched during its third quarter – like the OnePlus 7, OnePlus 7 Pro, Pixel 3a, Pixel 3a XL to name a few – these aren't the big flagships that tens of millions will be buying. The next big phone release isn't until August, with the Galaxy Note10, which will be part of Qualcomm's fourth quarter.