QUALCOMM Incorporated QCOM recently announced that it has posted the required security bonds in the District Court of Munich to enforce ban on some iPhone models of Apple Inc. AAPL in Germany. Although some industry experts opine that the ban is not likely to severely impact Apple, its shares declined almost 10% to close at $142.19 yesterday.
Qualcomm has been entangled in a bitter legal battle with Apple for quite some time now, related to alleged patent infringements. The chip manufacturer had accused Apple of misusing its secret software access to share information about its chips with Intel Corporation INTC engineers. This supposedly helped Intel to develop competitive modem chips for use in several iPhone models, thereby enabling Apple to entirely get rid of Qualcomm products from its portfolio.
To support its allegations, Qualcomm claimed that its modems required a combination of chips and software to allow phones to receive wireless data, owing to which it gave Apple access to its source code and software development tools to help it modify the software for iPhone compatibility. However, instead of honoring its commitment, Apple allegedly shared this confidential information with Intel.
As the legal battle continued in different countries, Qualcomm received some favorable verdicts from across the globe. In early December, the Fuzhou Intermediate People's Court in China held Apple guilty of twin patent infringement and ordered an immediate ban on sales of older iPhone models, from the 6S through the X in the country (read more: Qualcomm Wins Twin Patent Battle in China Against Apple). A few days later, the District Court of Munich, Germany, held Apple guilty of patent infringement and ordered a permanent injunction to the sale of some iPhone models in the country.
The infringed models were found to violate Qualcomm's intellectual property rights for power savings in smartphones. The bone of contention was a third-party violation of Qualcomm's patents around envelope tracking — a feature that helps phones preserve battery while sending and receiving wireless transmissions. Apple has allegedly used products from Qorvo, Inc. QRVO to bypass the patent in some of its iPhone models.
With Qualcomm posting security bonds totaling €1.34 billion in the German court, Apple would have to immediately pull out all iPhone 7 and 8 models from retailers across the country to honor the court verdict and enforce the ban. However, some models like iPhone XS, iPhone XS Max and iPhone XR will remain available.
Qualcomm has underperformed the industry in the past year with an average decline of 16.2% compared with a fall of 4.2% for the latter.
Qualcomm currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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