SAN FRANCISCO (Reuters) - Qualcomm Inc’s earnings call on Wednesday showed just how far the company is willing to go to preserve one of its core business practices of taking a cut of the selling price of phones.
The San Diego-based chipmaker posted quarterly profit and revenue that topped Wall Street forecasts, suggesting that a slowdown in the global smartphone business might be less severe than feared after a string of weak forecasts from other industry suppliers.
But Qualcomm’s other line of business - licensing a trove of patents that help make smart phones work - has traditionally driven most of its profits. And that business has dropped sharply over the past year, as revenue attributable to Apple Inc iPhones is withheld amid a legal dispute.
Qualcomm gave two indications on Wednesday it was prepared to accept lower revenue in exchange for maintaining the business structure and avoiding future customer disputes.
Most Qualcomm licensing revenue is calculated as a percentage of the selling price of a smartphone. That so-called device-level licensing model has been at the center of regulatory disputes in China, Korea and the United States and also in its disputes with Apple.
On Wednesday, Qualcomm said it would cap the phone price that is the basis of the revenue calculation at $400. More expensive phones, which can sell for $1,000, would still be treated as $400 for the purpose of the Qualcomm license fee.
That move follows a Qualcomm decision in November to license some patents that are required for connecting to so-called 5G networks, the next generation of mobile data networks, at a rate of 3.25 percent.