Trump Supports Qualcomm In FTC Monopoly Case

0
801

President Trump wants the U.S. to maintain its dominance in technological innovation. In that vein, the president supports Qualcomm (QCOM) in its monopoly case with the Federal Trade Commission (“FTC”):

The Trump administration urged a federal appeals court to put on hold an order that would force Qualcomm Inc. to change how it licenses its patents, saying the case “threatens competition, innovation, and national security.”

The filing Tuesday with the U.S. Court of Appeals in San Francisco puts the administration on the opposite side of the U.S. Federal Trade Commission, an independent government agency that filed the antitrust lawsuit against the chipmaker.

The U.S. Department of Justice also asked the federal appeals court to pause enforcement of the antitrust ruling. The DOJ implied Qualcomm would win on appeal because the ruling from U.S. District Judge Lucy Koh allegedly “ignored established antitrust principle and imposed an overly broad remedy.” QCOM was up over 3% in premarket trading Wednesday.

The Situation

In May Judge Koh ruled Qualcomm was a monopoly and wielded its monopoly power in an anti-competitive manner. The company allegedly used its dominant market position to hurt competitors and force unnecessary licensing fees on handset makers like Apple (AAPL). The lawsuit claimed Qualcomm needed to modify its business practices and renegotiate its license deals with customers.

The ruling could negatively impact Qualcomm’s earnings. Licensing revenue (“QTL”) represents about 23% of the company’s total segment revenue, and 55% of total EBIT. The EBIT margin for QTL is around 60% versus 15% for the equipment side of the business (“QTC”). Any hit to Qualcomm’s licensing revenue could have an out-sized impact to the company’s bottom line. Read more:

print

LEAVE A REPLY

Please enter your comment!
Please enter your name here