Qualcomm confirms Chinese settlement, gets 5% 3G/4G rate
Qualcomm (NASDAQ:QCOM) will pay RMB6.088B ($975M) to settle the Chinese government's antitrust probe, just a little less than the $1B reported by Reuters.
However, the company will get to charge a 5% royalty rate on 3G-capable devices (including multi-mode 3G/4G hardware, which account for a large % of Chinese 4G phones sold today) for access to "3G and 4G essential Chinese patents." 4G devices that don't support 3G CDMA or WCDMA networks will carry a 3.5% rate. The 5% 3G/4G rate is much better than what Canaccord was modeling.
Some fine print: Qualcomm will license its "essential Chinese patents" separately from other patents, and negotiate cross-licenses in "good faith." It also won't "condition the sale of baseband chips on the chip customer signing a license agreement with terms that the NDRC found to be unreasonable or on the chip customer not challenging unreasonable terms in its license agreement." However, Qualcomm isn't obligated to sell chips to a non-licensee.
The company has also agreed to create "a China-specific investment fund of $150 million to further the development of mobile and semiconductor technologies." It already committed $40M to similar investments in December.
FY15 (ends Sep. '15) guidance has been hiked on the low end: Revenue guidance is now at $26.3B-$28B vs. $26B-$28B, and EPS guidance at $4.85-$5.05 vs. $4.75-$5.05.
QCOM +2.2% AH to $68.58.
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