Qualcomm Inc. investors thought some of the biggest legal issues had subsided after the company's recent deal with Apple Inc., but a federal court ruling immediately plunged the chipmaker back into a sea of uncertainty.
United States. District Judge Lucy Koh joined the Federal Trade Commission late Tuesday, which filed a cartel lawsuit against the company in 2017. Koh decided that Qualcomm
violated antitrust laws by charging their patents unreasonably high royalties and calling their licensing practices "strangled competition" and ordered the company to renegotiate all contracts and to license their patents at "fair and reasonable prices". She also said that the company could not conclude exclusive supply contracts with companies like Apple
"We disagree in any way with the Judge's conclusions, their interpretation of the facts and their application of the law," Don Rosenberg, Executive Vice President and General Counsel of Qualcomm said in a statement.
Qualcomm's decision and immediate promise to appeal the decision and seek a stay in the Court of Appeals failed to save Qualcomm's stock from an uncertainty-driven slump of more than 10%. On Wednesday. Investors were rightly unsettled as Wall Street analysts, for once, had no predictions about what would happen in light of the Company's recent threat to its licensing and licensing business, the so-called Qualcomm Technology Licensing (QTL).
"Proposed remedies from the ruling are likely to affect QTL's profitability," analyst Susquehanna Financial Group Chris Rolland said in a letter to clients entitled "Just When You Think You Out … They Pull You." Back In ". "Rolland said the exact changes in the business requested by the judge are unclear and also what comes into effect immediately. He lowered his price target from $ 100 to $ 85. He also said that Apple may have the opportunity to renegotiate its long-term agreement with Qualcomm, which could bring nearly $ 5 billion in revenue in the third quarter, with the FTC case starting in early 2017. Stacy Rasgon of Bernstein Research believes that renegotiating the licensing agreements will be "cumbersome". However, given the judge's comments at the start of the proceedings in this case, investors should not have been surprised by the news, "but some investors might have done so. I hoped the judge had softened their views following Apple's recent capitulation. "Apparently not," Rasgon wrote to the customers in a note.
The appeal process may take several years. Until this case is resolved, another cloud is hanging over the stock. Qualcomm investors are back where they were two months ago when the Apple process began. Back in the sea of uncertainty, Qualcomm's stocks are not for the faint-hearted.
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