Qualcomm has been in litigation since 2017 with the US Federal Trade Commission (FTC), which accused the company of abusing its dominant position in the smartphone chip industry. Here’s what the FTC said on Monday.
Qualcomm’s (QCOM) licensing practice has been the subject of investigations in US courts for many years.
Qualcomm is one of the largest chip developers in the world, while outsourcing its production to companies such as Taiwan Semiconductor and Samsung Electronics.
In addition to selling chips, Qualcomm earns a significant portion of its revenue from licensing the thousands of patents it owns on technologies that power modern telephone systems.
On May 21, 2019, a district court ruled that Qualcomm’s licensing practices for premium LTE modem chips were anti-competitive and harmful to smartphone manufacturers and end consumers.
The US Federal Trade Commission (FTC) suit was upheld and the court ordered Qualcomm to change its way of doing business. Read more in Marketinfo.pro article “Qualcomm Shares Dropped After US Court Decision About Its Anti-Competitive Practices”.
However, Qualcomm filed an appeal with the San Francisco Court of Appeals, which concluded that the company’s aggressive competitive practices were not illegal behavior.
Acting FTC chairman Rebecca Kelly Slaughter said Monday that while she agrees with the trial court’s ruling that Qualcomm violated antitrust laws, the FTC faces “major obstacles” in trying to overturn the appellate ruling.
As such, the FTC will not seek a Supreme Court review of the federal appeals court’s decision, and this decision formally ends Qualcomm’s litigation.
Investors can view the news as positive for Qualcomm as the FTC’s decision removes risks to its future earnings and profits.
Qualcomm’s shares fell sharply on February 4, after the company warned that “chip shipments will remain limited during the first half of 2021” due to a shortage in the semiconductor industry. The fall in Qualcomm shares from the high on February 3 to close of trading on Monday was 21.3%.
At the same time, Qualcomm’s share price is still 97% higher than 12 months ago, and the last two quarters saw a sharp jump of 35% and 62% in revenue and 86% and 119% in earnings per share for Q4 2020 FY. year and Q1 FY2021 years respectively.
Seven analysts at once raised their target prices for Qualcomm shares after the last reporting quarter, and Piper Sandler earlier this month raised both the target price from $ 150 to $ 160 and the rating of the semiconductor stock from “neutral” to “superior”.
In addition, market experts say chipmakers will benefit from the shortage of semiconductors as supply constraints will allow them to raise their product prices. Read more in the articles “Semiconductor Companies to Benefit from Chip Shortages in 2021” and “Global Semiconductor Shortages Affected Shares of These Companies”.