Sahm Adrangi Warns that Qualcomm’s Stock Could Shrink by Half

On January 23, Sahm Adrangi stated that Qualcomm’s stock price could shrink by half due to upcoming lawsuits filed against the company throughout the world.

As an activist investor, Adrangi has a history of successfully betting against Chinese internet companies. Adrangi’s hedge fund, Kerrisdale Capital, released a research paper that shows that Qualcomm, a chip supplier, could be in danger of facing lawsuits as a result of its profits. A major lawsuit is possible in the United States with the U.S. Federal Trade Commission.

The U.S. Federal Trade Commission has already filed its case in the U.S. District Court for the Northern District of California. The Federal Trade Commission is accusing Qualcomm’s patent licensing and chip sale practices of being anti-competitive. The case also alleges that Qualcomm sought to create a monopoly on “premium” LTE modem chips and forced companies such as Apple to use its chips. These modem chips help mobile phones connect to wireless data networks. Qualcomm currently owns patents to 3G, 4G, and 5G networking technology.

Qualcomm has denied all allegations in the past and is currently stating that the Federal Trade Commission has no evidence of its claims. However, the company has made no official statements to the press. Sessions to hear arguments in this case started on January 4. Closing arguments will be made on February 1.

The Kerrisdale Capital report from Adrangi showed that if Qualcomm lost a lawsuit against the U.S. Federal Trade Commission, the company would have to license its core patents directly to its competitors. It would also have to renegotiate all of its licenses on new fair terms.

If Qualcomm loses the case against the U.S. Federal Trade Commission, it will be forced to change its company model completely. Another consequence of this lawsuit could be a cut in the company’s stock by as much as half. The report says that a lawsuit could “realistically cut Qualcomm’s licensing revenue, earnings power, and stock price in half.”

The chances of winning this case are not in Qualcomm’s favor, as the presiding judge, Lucy Koh, has ruled against Qualcomm in several cases in the past. The last case in which Koh ruled against Qualcomm took place in 2018 and involved the U.S. Federal Trade Commission taking antitrust action against Qualcomm. The ruling forced Qualcomm to follow up on its agreement to share its licensing with competitors.

In this particular case, Koh stated that Qualcomm’s “willingness to license all applicants, except for competitors of the licensor,” was a violation of and example of discriminatory conduct under the TIA IPR policy.

This new lawsuit will not only affect Qualcomm but also how smartphones are made and how much they cost, since Qualcomm’s modem chips are used in smartphones throughout the world. Because there is no jury in this case, Koh will file her decision after February.

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