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Is Qualcomm Trouble for Competitors or Troubled by Competitors?

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Trouble for competitors?

Earlier, we saw that Qualcomm (QCOM) is likely to report slowing revenues in fiscal 2Q16, as smartphone sales have slowed after a difficult 2015.

However, QCOM could report flat or higher EPS (earnings per share) owing to the licensing deals it recently signed with top Chinese (MCHI) handset makers such as Huawei and Lenovo.

Rivals Intel (INTC) and NVIDIA (NVDA) have failed to challenge Qualcomm’s dominance in the mobile space. Intel’s mobile segment has been posting severe losses for the last few years, and NVIDIA dissolved its mobile business in fiscal 2015.

In efforts to best Qualcomm, Intel has poached one of its top executives, and NVIDIA has filed a lawsuit against Qualcomm for unfair business practices. Let’s look at both of these scenarios.

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Executive moves

Intel has hired Qualcomm’s Murthy Renduchintala to head its mobile and other connected devices group. Renduchintala co-headed the QCT (Qualcomm CDMA [code division multiple access] Technologies) segment along with Cristiano Amon. Renduchintala exited the company as Qualcomm changed the co-president leadership structure and appointed Amon as its executive vice president.

Other departures in 2016 included Qualcomm Ventures’ managing director Jack Young and group head Nagraj Kashyap. Meanwhile, Qualcomm appointed a new chief information officer, Mary Gendron.

Lawsuits

If executive exits weren’t enough, Qualcomm has also been buried in lawsuits. It’s facing a probe from European (VGK) regulators for having charged below-cost fees for its mobile broadband chips between 2009 and 2011 to remove competition. Another lawsuit from LG Electronics claims that Qualcomm has overcharged LG under a licensing contract. LG is demanding reimbursement.

Rival NVIDIA is suing Qualcomm, alleging that the latter has misused its dominant position. Because of this, NVIDIA has faced delays in customer orders, customers backing out from signing contracts, and reductions in demand volume, forcing the company to dissolve its United Kingdom–based Icera unit just four years after acquiring it for $352 million.

According to court filings, NVIDIA is demanding a declaration from the judge that Qualcomm misused its dominant position, accountability of the profits made by the company due to this misuse, and compensation for its losses.

NVIDIA has also filed a patent lawsuit against Samsung (SSNLF) for using its graphics processing unit technology. It has demanded that the court ban the products that use this technology.

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