Qualcomm fears probe may hurt business
Print Edition
QUALCOMM Inc has warned an anti-trust probe and problems collecting royalties could harm its business in China next year while also disclosing new regulatory investigations in the United States and Europe.
China’s expanding high-speed 4G network is driving demand for smartphones with leading-edge technology, but Qualcomm’s opportunities have been clouded by an 11-month-old anti-trust investigation there. Wall Street is worried.
Qualcomm could face a fine of more than US$1 billion in China as a result of the National Development and Reform Commission investigation, and the company could be forced to make concessions that would hurt its highly profitable business of charging royalties on phones that use its patents.
Qualcomm also said it faces a new probe by the European Commission about rebates and other financial incentives in the sale of its chips. Another preliminary investigation by the US Federal Trade Commission concerns a potential breach of licensing terms.
“We’re continuing to cooperate with the NDRC. We’ve continued to meet with them regularly, exchange some ideas for potential ways to resolve it,” Qualcomm President Derek Aberle said. “But we don’t have an ability to update in terms of expectations and timing.”
Qualcomm has also been struggling to collect licensing revenue from some device makers in China, including local manufacturers the US chipmaker has done little or no business with in the past.
Any concessions on royalties that Qualcomm is forced to make in China could spread to manufacturers in other countries, some investors said.
“What people are most worried about is the ability to fence in this issue to Chinese vendors if there’s a reduced royalty rate, or does it spread to other geographies,” Standard Life portfolio manager Brian Fox said.
Qualcomm said it was difficult to predict the outcome of the US and European investigations.
The European probe is separate from a four-year-old complaint to the European Commission from a subsidiary of Nvidia Corp over alleged patent-related incentives and exclusionary pricing by Qualcomm.
Qualcomm forecast revenue for fiscal 2015 of between US$26.8 billion and US$28.8 billion. Analysts on average expected US$28.91 billion.
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