Huawei Forced To Pay Up: Interim Royalties Deal Highlights Qualcomm's Stellar Quarter

Qualcomm announced its earnings for the first fiscal quarter of 2019 - ending December 30, 2018. In the earnings report, the company also mentioned that it has agreed with Huawei on an interim agreement for paying royalties to QTL, the chip-makers licensing arm.

QTL has been working with both Huawei and Apple to get agreements in place to get the royalties owed to them on sales of their products. While neither company uses Snapdragon chipsets, they do use other components from Qualcomm. Hence the royalties.

Huawei did give Qualcomm a $150 million payment for royalties due under the interim agreement, which was part of the earnings announced today. That was in addition to the $100 million that was received in the fourth fiscal quarter of 2018, from Huawei. These are partial royalties payments from Huawei, and the numbers Qualcomm announced today do not reflect the full amount due by the Chinese smartphone maker.

Qualcomm also warned investors that if it does not reach an agreement before the interim agreement expires, Huawei may not make any other payments or make the full payment under the existing license agreement. That doesn't mean that Qualcomm won't be going after Huawei for those royalties, however.

Guidance for the second quarter also includes a $150 million royalties payment from Huawei, to QTL. Now this is just guidance, so it may happen, it may not. And would largely depend on whether or not a final deal is reached between the two companies.

Once Qualcomm is able to get a finalized deal with Huawei under their belts, the only company left to deal with is Apple. Who, arguably, started the whole thing for Qualcomm. Apple believes that Qualcomm's double-dipping is not right and that it is paying too much on each iPhone sold. Qualcomm sells you the hardware (system-on-chips, modems, etc), but also charges you royalties for using that hardware and the features that come with it. Apple doesn't like that, and they shouldn't. Hence why Apple is fighting it.

Outside of that interim agreement with Huawei, Qualcomm had a pretty decent quarter. Qualcomm brought in $4.8 billion in revenues, which is a 20-percent decrease from the same period a year ago. However, its income was $1.1 billion in the quarter, compared to a $6 billion loss a year ago. Earnings per share were $1.20 for the quarter. While Qualcomm beat on the bottom line, it did miss on the top line. However, that didn't keep its stock down. It's up two-percent in extended hours trading right now.

Interesting note on Qualcomm's earnings is the fact that it shipped about 22-percent fewer chipsets than a year ago. Just 186 million shipped. In its forward-looking guidance, it does expect that it will ship less chipsets in the current quarter. Expecting 150 to 170 million being shipped. which shows how much the smartphone market has slowed, especially in the high-end and premium tiers. However, it does expect that its revenue will remain relatively the same, compared to the same period a year ago.

Qualcomm did see some rather large decreases across the board, in its earnings this quarter compared to a year ago. A big part of that is due to the smartphone market slowing. However, analysts expected this, and hence why its stock is trading up in after-hours trading this evening.

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Alexander Maxham

Section Editor
Alex has written for Androidheadlines since 2012 as Editor of the site and traveled the World to many of the biggest Smartphone and Technology events. Alex has a background in Technology and IT and Deep Passion for Everything Android and Google. His specialties lay in Smartphones of all budgets, Accessories, Home Automation and more. Contact him at [email protected]
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