The $8/phone fight is through the rear view mirror. 5G capable devices and implementations will appear on the market around the end of next year. This fight is really about the future, although it's killing my investment in the present.
Qualcomm's FRAND licensing approach is more than fair, and the model could be used against Apple for the very same arguments Apple is using against Qualcomm and others, such as Samsung. I recall in a Qualcomm complaint against Apple that Apple was essentially arguing that it was fair to over charge Samsung for using three touch screen patents (4/10/17):
"Apple’s counteroffer is irreconcilable with its approach to valuing its own patents. As noted above, in its recent litigation with Samsung, Apple claimed that three Apple patents on user-interface features were worth $7.14 per phone. That is, Apple claims that thousands of Qualcomm patents on fundamental technologies that are essential to cellular communication—critical to the usefulness of the iPhone itself—pale in comparison to just three Apple patents on user- interface features. "
In raising the deliberately preliminary suggestion in my last post up the SI flag pole, I believe the outcome would be that Qualcomm could obtain greater licensing fees. If not acceptable, Paul E. Jacobs can head up the Telecommunications Practice as a Managing Partner of The Partnering Group, and establish strategic management best practices for the entire supply chain. He could possibly command $10K-$20K a day for his services...
Hardware Problem – The AAPL Bear CaseAt its core, Apple is a hardware company, and that's a big risk for AAPL stock By Vince Martin, InvestorPlace Contributor | Oct 5, 2017, 7:11 am EDT Get AAPL alerts: Submit
I’m a skeptic toward Apple Inc. (NASDAQ: AAPL) stock. So far in 2017, that skepticism has looked downright foolish, as AAPL stock’s price today is up 33% this year alone, even after a recent pullback.
The bear case for AAPL stock is tough to make on the surface. Apple is the world’s most valuable company, ever. The company has more cash than it knows what to do with, and it’s the premier brand in the world. And yet Apple stock trades for 14x 2018 analyst EPS estimates — around 13x when backing out the company’s net cash.
Even right now, the market is pricing AAPL stock as if its growth will come to an end relatively soon. That seems almost ridiculous as consumers wait in anticipation for the $999 iPhone X. But if an investor understands the role of hardware in the future tech ecosystem, that possibility starts to make more sense, as does the low valuation of Apple stock.
AAPL Stock Relies Heavily on the iPhoneOne of my long-held concerns about Apple stock is its reliance on the iPhone. Ancillary products have come and gone. The iPod once was a profit center, iPad revenue soared and fell, and now Services sales are rising (+19% through the first three quarters of FY17). But no matter what the product, non-iPhone revenue simply hasn’t moved ($77.8 billion in 2012 and $78.9 billion in 2016).
Buy Qualcomm Before Apple Starts Paying Royalties Again.
I initially wrote about Qualcomm ( QCOM) a little over 4 months ago. I rated the chip maker a buy for two main reasons. The first was their NXP ( NXPI) acquisition. This deal is estimated to not only increase their chip business by a 40%, but also lead them into multiple brand new business areas including automotive, Internet of Things, and digital networking. The second reason was because I believed the Qualcomm's steep drop after being sued by Apple ( AAPL) was overblown.
As you can see from the chart above, the stock has fallen about 14% since my initial call. I recently revisited my thought process and my work and had to ask myself the age-old question, am I wrong or am I early? If I was wrong I need to close my position, but I have no problem with being early. This is a long-term position for me and I'm willing to continue collecting the over 4% dividend payment as I wait.
Most of this article will be about the Apple lawsuit, but I wanted to touch very quickly on the NXP acquisition. The deal is expected to be complete by the end of 2017. Besides allowing to to break into new business areas, Qualcomm will be adding about $9.5 billion in revenue and $1.9 billion in Free Cash Flow. Nothing much has changed since my previous article covering this which you can read here.
Apple is currently suing Qualcomm in the US, China, and the UK for two main reasons. The first is that Apple is claiming that a recent ruling from the Supreme Court would prohibit Qualcomm from selling it's chips while also licensing its technology at the same time. The second is that Apple claims Qualcomm is price gouging.