Broker Check

Apple/Qualcomm Together Again

The big announcement last week was the end of the long suffering lawsuit between Apple and Qualcomm that stifled Qualcomm shares for years and slowed down Apples innovation pipeline. One can never trust statements from companies related to ongoing lawsuits as was evident throughout recent months leading to a very important court proceeding in San Diego. The surprising announcement on Tuesday came just before the patent case was to be litigated in court and brushed away damaging uncertainty regarding the outcome and quickly reversed the investment conversation from an earnings drag for both companies to potentially a wonderful future together regarding 5G phones and technology.

Qualcomm shares rose dramatically after the announcement of this two year legal battle that had been resolved with Apple agreeing to a large payment to Qualcomm (exact details not released) and setting up a framework to work together on future technology innovations. Apple shares have also moved higher as analysts and investors think ahead to its 5G phone rollout that is now more certain for the 2020 timeframe. This is important and allows Apple to work with the best technology in the business and walk away from Intel who seemed to be struggling with its own 5G chip technology. As we think about all the possibilities that Apple and Qualcomm working together will bring to a new wave of instant 5G communication and data transfer it is clear why Apple decided to settle and continue to pay Qualcomm licensing fees for its portfolio of modem chipsets.

We are moving into an exciting time for Apple and Qualcomm as new innovation will lead to new avenues of growth in healthcare, automotive, robotics, internet of things, and increased digitalization of our connected lives. Technologists are thinking way beyond phones regarding the possibilities and applicability of 5G communication and these important players working together will have a major say in what that world looks like and what devices we will be using to obtain critical information. I believe both stocks remain attractive for the long term and will be monitoring closely details regarding their new agreement to get a better handle on cash flows and royalty payments.

Earnings season is in full bloom this week with over 100 S&P 500 companies publishing their quarterly report cards. I expect our best companies to report good numbers and guidance with a touch of conservatism coming from the statements from executives. The early reporting from most of our banking and financial holdings was encouraging and stock reaction was favorable. As with every reporting period, expectations coming into the announcements is a key detriment toward stock reaction. So far, it seems that expectations are low with weather and the government shutdown effects being discarded for future optimism toward a successful China negotiation and improved global growth in the second half of the year. I will be watching and listening closely for any changes in guidance and looking to take advantage from any misunderstood statements.

Have a great week and enjoy the weather,

Roger N. Steed

April 22, 2019

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