Qualcomm’s Faulty Business Model

    0
    229
    qualcomm stock chart

    There probably aren’t many business experts who would advise companies to make a habit of upsetting their biggest customers, yet Qualcomm (QCOM) doesn’t appear to spot the danger in that behavior.

    Apple is Qualcomm’s largest account, responsible for a huge chunk of Qualcomm’s bottom line. Apple recently filed two separate lawsuits in China against Qualcomm, accusing the company of abusing its market position. Only a week before, Apple initiated a similar case against the company in a San Diego Federal court.

    Even worse, Apple isn’t the only one making accusations. The U.S. Federal Trade Commission also got in on the act last week, suing Qualcomm for anticompetitive practices. Plus, just a few weeks ago, South Korea fined Qualcomm $850 million for patent-related issues.

    All of these problems aren’t helping Qualcomm’s share price. By late this morning, the chipmaker’s stock was down by more than 5%. That fact is particularly telling because the rest of the semiconductor sector is doing well, and is regarded quite positively.

    Whatever Qualcomm is doing to irritate Apple to the point of lawsuits here and internationally, the company doesn’t seem to be considering the long term implications. It’s not like Qualcomm has no competition. The other well-regarded companies would probably love to have some of Apple’s business, even if they had to share it.

    And it’s not like Qualcomm can afford to lose its single biggest client. A big reason the stock price is taking a dive is that the 2017 Q1 earnings report released yesterday did not live up to analyst expectations. While Qualcomm did beat earnings estimates by a hair, it fell short on revenue.

    Qualcomm might want to start focusing a little on building company loyalty instead of alienating its biggest customer. Because Apple taking its business elsewhere will be nothing short of catastrophic for Qualcomm.

    LEAVE A REPLY