Qualcomm says it will stick with Apple, even though it 'has been actively driving regulatory attacks' around the world

Qualcomm CFO sees China softness
Qualcomm CFO sees China softness

Though Apple and Qualcomm are battling it out in court, the chipmaker has held on to its key client.

Qualcomm will remain a "good" Apple supplier during a legal dispute between the two companies, CEO Steve Mollenkopf said on a conference call during the company's quarterly earnings report.

But Qualcomm chief financial officer George Davis said recent probes were "not coincidental," and that Apple "has been actively driving regulatory attacks on Qualcomm's business in jurisdictions around the world."

Mollenkopf assured investors on the conference call he still believes there is "no better long-term partner for Apple than Qualcomm."

"Our preference is always to resolve customer disputes through negotiations, rather than litigation, so it's regrettable that Apple has chosen this path," Mollenkopf said. "They want to pay less than the fair value that Qualcomm has established in the marketplace for our technology, even though they have made billions in profits from using that technology."

Steve Mollenkopf, CEO of Qualcomm
Justin Solomon | CNBC

Apple filed a lawsuit for roughly $1 billion against Qualcomm, saying Qualcomm is "charging royalties for technologies they have nothing to do with." The iPhone maker filed similar lawsuits in Beijing, saying Qualcomm abused its clout in the chip industry.

"We have a long history of successfully defending our licensing practices and business model, which have been tested around the world, most recently in China," Mollenkopf said.

The company's financial guidance was in line with estimates on Wednesday, despite its legal challenges.

For the second quarter, Qualcomm said it expected adjusted earnings per share of $1.15 a share to $1.25 a share. Analysts polled by Thomson Reuters were expecting about $1.20 a share.

"Unlike China, where Qualcomm wasn't getting paid by Chinese handset vendors, I expect Apple to still pay, so I'm not surprised it wasn't factored into guidance for next quarter," said Patrick Moorhead, principal analyst at Moor Insights & Strategy. "I don't see resolution for at least a year."

The U.S. Federal Trade Commission also filed a lawsuit this month against Qualcomm alleging unfair patent licensing practices, while Korean regulators fined Qualcomm $854 million for unfair trade practices in December. Qualcomm has said the FTC's case is "significantly flawed."

Earnings results

Qualcomm reported quarterly earnings that beat analysts' expectations on Wednesday, as shipments of 3G and 4G devices popped 8 percent, boosting its licensing division.

But revenue fell short of estimates. Davis told CNBC that it is seeing overall softness in its China business, particularly in its chip unit.

The company posted fiscal first-quarter earnings per share of $1.19, adjusted. Revenue for the quarter came in at $5.99 billion. That's compared to adjusted earnings of 97 cents a share on revenue of $5.8 billion in the year-earlier period.

Analysts expected Qualcomm to report earnings of about $1.18 a share on $6.12 billion in revenue, according to a consensus estimate from Thomson Reuters.

One particular Chinese client had credit issues during the quarter, Davis told CNBC, and its unclear whether the softness in China is seasonal.

Moorhead said he doesn't see the softness as seasonal.

"The China smartphone market isn't doing great and that likely impacted Qualcomm," Moorhead said. "The rest of the industry is feeling it with the exception of Huawei and OPPO who are taking market share."

Qualcomm EPS beats, revenues miss
Qualcomm EPS beats, revenues miss

Shares fell as much as 3 percent in extended trading, before paring losses. They were last down about 2 percent.

Still, it comes as Qualcomm is in the midst of an acquisition of NXP Semiconductors. In Wednesday's earnings, the company said it still expects the deal to close by the end of the 2017 calendar year.

Romit Shah, analyst at Nomura's Instinet, addressed the suits in a note to clients Monday.

"Recent rulings and lawsuits are stronger and broader than anticipated," Shah said. "Considering recent developments with QTL [Qualcomm Technology Licensing], we believe it is logical to assume that the regulatory agencies in the U.S., Europe, and Asia might take longer to approve the NXPI deal."

Mollenkopf introduced a new processor, the 835 Snapdragon, at technology tradeshow CES earlier this month. Qualcomm processors are found in phones like the Samsung Galaxy S7 edge, BlackBerry's Android device and the Google Pixel.

New 5G-enabled chips, made by Qualcomm, are expected to propel industries like virtual reality, video streaming, drones and the internet of things.

— CNBC's Jon Fortt and Tae Kim contributed to this report.

Qualcomm CEO: Apple has been driving regulatory attacks
Qualcomm CEO: Apple has been driving regulatory attacks