SAN DIEGO _ Qualcomm said Wednesday it will receive $4.5 billion to $4.7 billion in catch-up payments from Apple as part of last month's settlement of their long-running legal war.
The one-time payment covers roughly two years where Apple and contract manufacturers that assemble iPhones withheld patent royalties from Qualcomm while both sides battled in court.
Qualcomm Chief Executive Steve Mollenkopf called the end of the litigation "a win for both companies."
"We are pleased with the result and pleased to have it behind us," said Mollenkopf in a conference call with analysts. "At a high level, this settlement involves two long-term agreements with Apple, a patent license agreement and a multi-year chip supply agreement."
Beyond the catch-up payment, other details about Qualcomm's settlement with Apple remain murky. That, coupled with a slumping smartphone market, cast a shadow over the San Diego mobile technology developer's fiscal second-quarter results.
While Qualcomm beat Wall Street analysts' financial targets for the March quarter, headwinds from weakening smartphone sales, particularly in China, sent mixed signals to investors looking for better news.
San Diego-based Qualcomm reported sales of $5 billion and earnings of $700 million, or 55 cents per share, for the quarter under Generally Accepted Accounting Principles.
For the same quarter last year, Qualcomm posted revenue of $5.2 billion and earnings of $400 million, or 22 cents per share, under GAAP.
On an adjusted basis, which is how Wall Street analysts track results, Qualcomm reported non-GAAP sales of $4.9 billion and earnings of 77 cents per share for the March quarter.
That beat analysts' forecast of 71 cents per share in earnings on sales of $4.8 billion.
As part of Qualcomm's conference call, analysts hoped to glean more information about the amount Apple is paying in patent royalties to Qualcomm _ specifically if Apple was paying more or less than the $7.50 per iPhone that it paid from 2013 to 2016 before the court fight.
The companies, however, are keeping terms of the deal confidential, and it was difficult to uncover the amount of patent fees that Apple is paying per iPhone based on Qualcomm's financial guidance.
"Whatever upside that was supposed to come from licensing, the market weakness is offsetting it right now," said Stacy Rasgon, an analyst with Bernstein Research. "It is possible they are in the ballpark of getting what they were getting before _ something like $7 or $7.50. I don't think it is any more than that, but it is difficult to know."
The company sold 155 million mobile chips in the quarter, below analysts' estimates of 166 million shipments in the saturated smartphone market.
Weakness in top tier smartphones in China and market share gains by Huawei, which doesn't use Qualcomm chips in its top line phones, contributed to the decline in chip shipments, said Cristiano Amon, Qualcomm's president.
In addition, some smartphone buyers are waiting for the rollout of next generation 5G networks before upgrading, said Amon. 5G is expected to become more widely available in the U.S., Europe, Korea, Japan and China later this year and into 2020.
As part of their April 16 arrangement, Apple and Qualcomm signed a six-year license to Qualcomm's mobile patent portfolio, with an option to renew for two more years.
Apple also inked a multi-year semiconductor supply agreement with Qualcomm that's expected to pave the way for a 5G iPhone with Qualcomm chips in 2020.
Qualcomm said the settlement will add roughly $2 per share in earnings once chip shipments ramp up, likely next year.
In addition, the company believes the Apple settlement puts it in a better position in negotiations with Huawei, which also has withheld patent fees under a 2014 agreement with Qualcomm.
While both sides are negotiating, Huawei is making partial payments, including $150 million in the current quarter.
Looking ahead, Qualcomm expects revenue in the June quarter _ excluding the one-time Apple catch-up payments _ of $4.7 billion to $5.5 billion and adjusted earnings per share of 70 cents to 80 cents.
That's below the $5.6 billion in sales and $1 per share of adjusted earnings for the June quarter last year.
But Mollenkopf pointed to growth on the horizon as 5G networks are more widely deployed and spark a smartphone upgrade cycle. Qualcomm's chips, antenna modules and other technologies are currently being designed into 75 5G devices.
"We are executing well on our strategic priorities as 5G commercial launches begin around the world," said Mollenkopf.
Qualcomm released results Wednesday after markets closed. Its shares, which have gained more than 50 percent since the Apple settlement in mid-April, declined 3 percent to $83.20 in after-market trading on the Nasdaq Exchange.
