Loup Ventures

About the Author Loup Ventures

At Loup Ventures, research is in our blood. The spirit of our team has always lived on the curiosity to discover new insights that yield investment opportunities. For years we did this on Wall Street, focused on public tech companies. Now we invest in private frontier tech companies, but public companies like Tesla, Nvidia, and others are also meaningful innovators in frontier tech. These public companies are shaping the emergence of AI, robotics, autonomous vehicles, and AR/VR just as much as early stage startups. As a result, we’ve always kept a watchful eye on public market participants to inform our private investment strategy. Gene Munster is a managing partner and co-founder at Loup Ventures. Prior to Loup Ventures, Gene was a managing director and senior research analyst at Piper Jaffray where he covered technology companies including Apple, Amazon, Google and Facebook. During his 21-year tenure, Gene received many acknowledgements including: Top Stock Picker from Forbes, Best on the Street from The Wall Street Journal, and was widely recognized for his work on Apple. Gene holds a bachelor’s degree in finance and entrepreneurship from University of St. Thomas.

A Look at Qualcomm (QCOM)-FTC Outcome and Its Impact on Apple (AAPL)


By Gene Munster

Qualcomm (QCOM) has lost a case to the FTC, effectively ruling the company has violated antitrust laws by unlawfully suppressing the market for smartphone chips and using its dominant position to overcharge for patent licensing fees. Qualcomm is appealing the decision.

Apple (AAPL) and Qualcomm, in April of this year, settled a related dispute with the companies agreeing to a 6-year deal in which Apple will continue to pay licensing fees to Qualcomm. We believe today’s announcement will have the following impact on Apple:

  • The most likely outcome (we guess 80% chance) is that the ruling will be upheld and Apple’s recently negotiated deal with Qualcomm will remain unchanged. Apple and Qualcomm were obviously aware of the FTC case during their negotiations, and today’s outcome was likely factored into that agreement.
    • This includes a royalty of approximately $8 per device, which means 1.8B in annual revenue to Qualcomm (Apple’s revenue this year is expected to be $257B). Previous to the agreement Qualcomm was attempting to charge Apple closer to $15 per device.
  • The less likely (15% chance) case is that Apple is able to renegotiate its deal with Qualcomm based on today’s ruling.
  • Even less likely (5%), is Apple’s option of finding another modem supplier. With Intel exiting the market, Apple is working on their own modems as to not be reliant on Qualcomm, but they likely won’t be available for several years. MediaTek, a Qualcomm competitor, is a more favorable option following today’s ruling, given their chip prices will decline with reduced royalties to Qualcomm.

Disclaimer: We actively write about the themes in which we invest or may invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we may write about companies that are in our portfolio. As managers of the portfolio, we may earn carried interest, management fees or other compensation from such portfolio. 

 

Read more: Will Qualcomm (QCOM) Stock Price Get Back to $60-65? Not So Sure

 

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