Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

MarketScreener Homepage  >  Equities  >  Nasdaq  >  Apple    AAPL


News SummaryMost relevantAll newsOfficial PublicationsSector newsMarketScreener StrategiesAnalyst Recommendations

Apple : Qualcomm CEO Steve Mollenkopf defends business model at FTC antitrust trial

share with twitter share with LinkedIn share with facebook
share via e-mail
01/12/2019 | 05:10am EDT

Jan. 12--In 2011, Apple began talks with Qualcomm about using the San Diego company's chips in iPhones for the first time.

But there was a catch, said Qualcomm Chief Executive Steve Mollenkopf in testimony Friday in federal court in San Jose.

Apple proposed switching from Infineon Technologies -- which had supplied iPhones since 2007 -- to Qualcomm cellular modem chips for the next three years, "but they wanted us to pay them $1 billion to get that opportunity," said Mollenkopf.

The U.S. Federal Trade Commission has accused Qualcomm of violating anti-monopoly laws -- in part by entering into de facto exclusive supply deals with Apple that froze out Intel and other competitors.

Mollenkopf's testimony before U.S. District Judge Lucy Koh attempted to give Qualcomm's perspective on these supply deals that the FTC and Apple have called out as anti-competitive.

"We wanted to make sure we didn't pay the incentive, and then didn't get the volume," said Mollenkopf. "There was a lot of negotiations and essentially we got to an agreement. It worked out for both parties."

Testimony continued near the half-way point of the 10-day trial, with the FTC continuing to make its case that Qualcomm's business practices violate anti-trust laws.

There is a lot at stake. The FTC's case strikes at the heart of Qualcomm's unusual business model of licensing its huge portfolio of cellular patents and selling smartphone chips as separate products.

The agency has called a steady stream of Qualcomm customers -- ranging from Samsung to Lenovo to Motorola to Apple -- that contend that Qualcomm threatened to cut off supply of its top-tier 4G and 3G CDMA chips during patent license negotiations.

Because they need the chips to launch high-end devices, smartphone makers don't negotiate as hard as they otherwise would to reduce Qualcomm's high patent licensing rates, according to the FTC.

Qualcomm collects patent royalties based on the wholesale price of smartphones -- with rates running from 3.25 percent to 5 percent of the device costs up to a cap of $400.

Since the FTC is presenting its evidence, much of the testimony supports its allegations, including from tech heavyweights Intel and Apple.

Tony Blevins, Apple's vice president of procurement, testified that the two companies entered into a second supply deal in 2013 where Apple would receive "rebates" if it bought all of its chips from Qualcomm.

Apple was free to add a second supplier, but it would no longer receive the rebates, said Blevins.

"They made it very unattractive for us to choose a different chipset supplier," said Blevins. "I won't mention any numbers but these rebates were very, very large."

Mollenkopf said the 2013 agreement was similar to the 2011 deal.

Judge Koh questioned Qualcomm lawyers about whether the $1 billion figure was public information or confidential. Qualcomm's outside lawyer Bob Van Nest said he believed the amount had not been sealed.

Blevins said the agreement led Apple to scrap plans to use Intel cellular modem chips in an iPad Mini tablet model that was launching in 2014.

On cross examination by Qualcomm lawyers, Blevins said Apple decided to add Intel as a second chip supplier for certain iPhones anyway in 2016 -- before its agreement with Qualcomm expired.

Apple sued Qualcomm over its business practices in January 2017. Apple ditched Qualcomm as a supplier for all new 2018 iPhones and now uses modem chips solely from Intel.

Blevins said Apple wanted to negotiate a chip supply deal with Qualcomm, but the relationship soured after it filed its lawsuit.

"At the time we made this challenge, they were no longer willing to sell us chips," he said. "We were right back to no license, no chips."

But Blevins conceded that Qualcomm continues to supply modem chips for older model iPhones today -- despite the fierce legal battle.

Aicha Evans, Intel's chief strategy officer, said supplying a chip to the iPad Mini in 2014 would have helped the company break into the market and pave the way for supplying iPhones. Not getting the deal was a significant setback, she said.

Asked if she respected Qualcomm, Evans said "As a technology company, yes. As a business model, no. They are excellent engineers. That does not give them the right to be the only ones (by) using unfair business practices."

Mollenkopf said that he wasn't aware of Qualcomm threatening to cut off chip supply during licensing negotiations, saying the company has never stopped shipping chips to any smartphone maker during a licensing dispute.

The trial continues next week. It is now scheduled to wrap up on Feb. 1





(c)2019 The San Diego Union-Tribune

Visit The San Diego Union-Tribune at www.sandiegouniontribune.com

Distributed by Tribune Content Agency, LLC.

© Tribune Content Agency, source Regional News

share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on APPLE
06/17APPLE : 2020 iPhone XS Max equivalent set to have an even larger display
06/17APPLE : Security to boost adoption of contactless payments in Saudi Arabia
06/17APPLE : Amazon Prime Day is here early for the latest Apple iPad
06/17DEADLINE MONDAY ALERT : The Schall Law Firm Announces it is Investigating Claims..
06/17APPLE : Your Apple Watch may soon get a better accessory to monitor your glucose..
06/16APPLE : How to unlock an Apple Watch
06/16MATTEL : reg; Unveils Hot Wheels™ id, Groundbreaking New Play System Bring..
06/15APPLE : opens second Taiwan store
06/15LEAD PLAINTIFF DEADLINE ALERT : Faruqi & Faruqi, LLP Encourages Investors Who Su..
06/15APPLE : opens second Taiwan store
More news
Financials ($)
Sales 2019 257 B
EBIT 2019 62 546 M
Net income 2019 53 346 M
Finance 2019 97 442 M
Yield 2019 1,57%
P/E ratio 2019 16,64
P/E ratio 2020 15,00
EV / Sales 2019 3,02x
EV / Sales 2020 2,94x
Capitalization 875 B
Duration : Period :
Apple Technical Analysis Chart | MarketScreener
Full-screen chart
Technical analysis trends APPLE
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 41
Average target price 211 $
Spread / Average Target 11%
EPS Revisions
Timothy Donald Cook Chief Executive Officer & Director
Arthur D. Levinson Chairman
Jeffrey E. Williams Chief Operating Officer
Luca Maestri Chief Financial Officer & Senior Vice President
Kevin M. Lynch Vice President-Technology
Sector and Competitors
1st jan.Capitalization (M$)
APPLE22.92%797 366
XIAOMI CORP--.--%31 991
MEITU INC--.--%1 449
DIGIA OYJ5.96%91
DORO AB-0.73%90