Qualcomm stock was trading at roughly $58 per share before the news broke, and is now trading at nearly $70 per share. The companies have also reached a six-year license agreement, effective as of April 1, 2019, including a two-year option to extend, and a multiyear chipset supply agreement. The decision comes only months after Intel said it was speeding up its 5G modem plans.
The settlement was announced as opening arguments were beginning in San Diego federal court in the federal trial of a patent dispute between the two tech giants.
Bond investors also joined in, with Qualcomm's 4.3 percent 2047 issuance becoming one of the most heavily traded bonds in the US corporate space on Wednesday, according to capital markets publication IFR. However, the entire game changed in the last few 12 hours.
"Intel isn't trading lower because modems represent such a small portion of revenues for the company", said Patrick Moorhead of Moor Insights & Strategy. Qualcomm is one of the top suppliers of chips that can connect to 5G networks. As soon as the deal was announced, it became clear that Apple will use once again Qualcomm modems in future iPhone versions, including the 5G kind, which are already available on Android phones.
On Tuesday in a San Diego courthouse, both Apple and Qualcomm have unexpectedly settled all their legal disputes.
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A victory for Apple would have hampered Qualcomm's ability to collect fees on the technology that powers mobile phones around the world. Their exit of course leaves the floor entirely open to Qualcomm who now own the vast majority of 5G modem contracts.
Apple accuses Qualcomm, which holds the most patents for chips, of taking advantage of its dominant position to charge exorbitant amounts for its chips or access to its patents.
Along with licensing Qualcomm's patents, Apple is also going to resume buying chips from Qualcomm. Qualcomm's market share price in China soared to by 23%, its highest ever since 1999.
"I believe both Apple and Qualcomm got deeper into this than they wanted to", analyst Patrick Moorhead of Moor Insights & Strategy said in a statement. That doesn't mean that Apple will make a 5G iPhone this year, but a new report that surfaced after the settlement news claims that we'll have a 5G iPhone in stores only in 2020.
"What this means in the case of the iPhone is that when Apple engineers create a revolutionary new security feature such as touch ID, which enables breakthrough technologies like Apple Pay, Qualcomm insists on royalties for these and other innovations it had nothing to do with and royalty payments go up", it said.