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Apple V. Qualcomm Heats Up with China Suit; Qualcomm Refutes

Qualcomm (QCOM) shares are up $1.33, or 2.4%, at $56.33, as the company this afternoon responds to what Reuters’s Diane Bartz writes are additional suits against the company by Apple (AAPL), this time in China.

You’ll recall Apple last week filed suit against Qualcomm in the U.S., saying the wireless chip maker owed Apple a billion dollars in rebate payments, claims Qualcomm called “baseless.”

In Bartz’s piece this afternoon, she writes that Apple filed suit against Qualcomm in Beijing, claiming Qualcomm “abused its cloud in the chip industry,” as Bartz put it. A second suit claims Qualcomm has “is failing to live up to promises made to license ‘standard essential patents’ broadly and inexpensively.

Apple shares are up $1.73, or 1.4%, at $121.70.

Says Qualcomm’s chief counsel, Don Rosenberg,

These filings by Apple’s Chinese subsidiary are just part of Apple’s efforts to find ways to pay less for Qualcomm’s technology. Apple was offered terms consistent with terms accepted by more than one hundred other Chinese companies and refused to even consider them. These terms were consistent with our NDRC Rectification plan. Qualcomm is prepared to defend its business model anywhere in the world. We are proud of our history of contributing our inventions to the development and success of the mobile communications ecosystem.

Tech Today: New Relic Surges, Seagate Soars, CommVault Sinks

Here are some things going on today in your world of tech:

Shares of application management tools maker New Relic (NEWR) are up $3.70, or 11%, at $37, after Cisco Systems (CSCO) last night announced it would buy AppDynamics, a privately held company that’s something of a competitor to New Relic, for $3.7 billion.

Alex Kurtz with Pacific Crest, who covers infrastructure software, writes that the deal “We certainly view the acquisition of AppDynamics as another positive for NEWR and would be buyers of shares.”

“We see upside to $44, or 5.3x EV-to-C2018 estimated revenue of $386.5 million,” he writes.

Shares of Seagate Technology (STX) are up $7.70, or almost 21%, at $45.14, building dramatically upon last night’s after-hours gains, after the hard disk drive maker yesterday afternoon comfortably beat fiscal fiscal Q2 expectations and offered a Q3 forecast that topped consensus, and a much-better-than-expected outlook for 2017.

Apple: Watch out for the ‘Mix Down,’ Warns Barclays

Shares of Apple (AAPL) are down 9 cents at $119.99, after Barclays analyst Mark Moskowitz this morning cut his rating on the shares to Equal Weight from Overweight, and trimmed his price target two bucks to $117, writing that investors should not expect a return to growth for the company’s iPhone business as the smartphone market continues to deteriorate.

Front and center, in his view, is that iPhone users are “mixing down,” meaning, buying the last version of the thing rather than the newest.

“Our research indicates that recent smartphone customers increasingly are opting for the iPhone 6S — based model priced $100 less than that of iPhone 7.

Moskowitz cut his estimate for the smartphone market’s overall unit growth to a decline of 0.4% this year, versus what he had expected would be 4.4% growth. He thinks in 2018, the market may rise 5.5%, but that’s down from what he’d predicted at 7.8% previously.

Moskowitz cuts his iPhone estimate for this calendar year to 220.6 million units, down from 225.8 million units he previously imagined. That represents growth of 3.4% versus what would have been 5.9%. He also trims his average selling price estimate to $648 from $650.

Tech Today: GoPro Surges, Yahoo! Rising, Cutting Apple Estimates

Here are some things going on today in your world of tech:

Shares of adventure camera maker GoPro (GPRO) are up 73 cents, or almost 8%, at $10.14, after Pacific Crest’s Brad Erickson reiterated a Sector Weight rating on the shares, “checks indicate Q4 turned out better than feared, which could give GPRO a near-term reprieve given high short interest and negative sentiment.”

“While 4Q16 and early 2017 will likely show some growth given how GoPro under-shipped the channel in 2016 due to excess inventory,” writes Erickson, “this near-term dynamic does not change our longer-term view that this market is saturated.”

Shares of Yahoo! (YHOO) are up $1.33, or 3%, at $43.73, after the company yesterday afternoon reported better-than-expected Q4 results, but, more important to the Street, disclosed user metrics that suggest a level of user engagement that will support the company’s pending buyout of its ad business by Verizon Communications (VZ), despite two massive data breaches it disclosed last year.

Verizon reported its own results this morning, which disappointed on wireless metrics. The stock is down $2.25, or 4%, at $50.16. The company said that ” “we’ve not yet reached any final conclusions yet.”

Qualcomm: Apple Suit May Not Do Much, History Shows, Says Morgan Stanley

Don’t presume the worst about Apple’s (AAPL) suit against Qualcomm (QCOM), advises Morgan Stanley’s James Faucette in a note to clients this morning — these things historically have had little impact, in his view.

Shares of Qualcomm are down $8.30, or almost 13%, at $54.59, after multiple outlets reported on Friday that Apple one of its largest customers, has filed suit against Qualcomm for withholding $1 billion in rebates owed Apple, in a move to punish Apple for helping South Korean regulators investigate the chip maker.

As I wrote earlier, the view from the Street is not so great this morning, including one downgrade of the stock.

Faucette, who has an Equal Weight rating on the shares, writes that actions by customers against Apple have tended to lead to regulation, which Qualcomm already faces. Those battles “have seen final resolution with modest adjustments to royalty rates, with the opportunity to offset any drag with increased chipset share.”

Qualcomm: Instinet Cuts to Hold as NXP Buy Now Faces Delays

Shares of Qualcomm (QCOM) are down $8.30, or almost 13%, at $54.59, after multiple outlets reported on Friday that Apple (AAPL), one of its largest customers, has filed suit against Qualcomm for withholding $1 billion in rebates owed Apple, in a move to punish Apple for helping South Korean regulators investigate the chip maker.

As I wrote earlier, the view from the Street is not so great this morning.

The stock has gotten one downgrade, from Romit Shah of Instinet, who cuts his rating to Neutral from Buy, and slashed his target to $70 from $80, writing that the regulatory scrutiny now imperils the company’s $47 billion acquisition of NXP Semiconductors (NXPI).

“It seems inconvenient,” writes Shah, “that, amid increased scrutiny into QTL, Qualcomm requires regulatory approval for the NXPI acquisition from many of the same countries where it has outstanding regulatory complaints/litigations.”

Qualcomm Plunges: Bad News When Your Top Customer Sues You, Says Bernstein

Shares of Qualcomm (QCOM) are down $8.30, or almost 13%, at $54.59, after multiple outlets reported on Friday that Apple (AAPL), one of its largest customers, has filed suit against Qualcomm for withholding $1 billion in rebates owed Apple, in a move to punish Apple for helping South Korean regulators investigate the chip maker.

The news flow from Street observers this morning is not good. 

Bernstein Research’s Stacy Rasgon, who has a Market Perform rating on Qualcomm, this morning cuts his price target to $65 from $80, anticipating “the overhang from what appears to be an all-out attack on the business model from both regulators and largest customers will remain for quite some time.”

The $1 billion is a “sideshow,” writes Rasgon.

“Rather, in the suit Apple is attempting a direct assault on Qualcomm’s basic licensing business model.”

Intel, AMD, TI Among Beneficiaries as Chinese Lending Spurs Chips, Says BlueFin

BlueFin Research Partners analyst Paul Peterson today reiterates a positive outlook for trends in semiconductors, writing that much of the chip world is being helped by China, and to a lesser extent by a cooperative personal computer market.

“After an anemic 5-year CAGR of 2.5% and two consecutive years of flattish revenues, the semiconductor industry is poised for solid growth in 2017, in our view.”

That bodes well for “the vast majority of semiconductor suppliers,” but he calls out in particular Analog Devices (ADI), Texas Instruments (TXN), Monolithic Power (MPWR), Infineon (IFX), Broadcom (AVGO), Intel (INTC), Taiwan Semi (TSM), and Advanced Micro Devices (AMD).

Apple: Suit Against Qualcomm Could Help Profit Margin, Says RBC

Shares of Apple (AAPL) are up 3 cents at $120.03, in late trading, after both Bloomberg and The Wall Street Journal reported just before market close that the company is suing one of its big chip suppliers, Qualcomm (QCOM), and it has not taken long for some on Wall Street to reflect on the matter.

RBC Capital’s Amit Daryanani writes in a note to clients this evening that it’s possible Apple could see a lift to margins if all the issues facing Qualcomm reduce the amount it can charge in royalties, and also open up the market to more competition from Intel (INTC).

Qualcomm stock is unchanged in late trading at $62.88, after falling 2.4% toward the end of the regular session.

Qualcomm Sued by Apple over ‘Punishment’ Tactics, Say Bloomberg, WSJ

Shares of wireless chip giant Qualcomm (QCOM) are down $1.24, or 2%, at $63.30, after Bloomberg and The Wall Street Journal both reported Apple (AAPL), one of its largest customers, is suing the company for claims including Qualcomm withholding $1 billion owed Apple.

Qualcomm has long band the exclusive supplier of baseband wireless modem chips for Apple’s iPhone, though Apple this year gave some of the business to Intel (INTC).

Bloomberg’s piece, without byline, relates Apple is saying Qualcomm sought to punish Apple for cooperating with South Korean officials who have been investigating Qualcomm’s policies for licensing its technology pertaining to cellular communications, and the chips based on those standards:

Apple Inc. filed a lawsuit accusing Qualcomm Inc. of monopolizing the market for chips for wireless devices, and of withholding $1 billion in retaliation for cooperating with antitrust authorities in South Korea, Bloomberg News reports.

The Journal piece, by Tripp Mickle, relates that Apple is suing Qualcomm for having demanded “onerous terms for its technology” to “punish Apple for cooperating in Korean regulatory probe.”

Today’s reports follow a complaint brought by the U.S. Federal Trade Commission on Tuesday, against Qualcomm, alleging the chip maker had struck a special arrangement with Apple to shut out competitors from the baseband chip market.

Qualcomm on Tuesday disputed the allegations and characterized the FTC as rushing to bring a case before the institution of a new presidential regime in Washington, D.C.