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UPDATE 3-Qualcomm hangs on to most Apple gains after earnings report

Sayanti Chakraborty and Stephen Nellis

(Adds comments from executives, analysts and investors, updates share price)

May 1 (Reuters) - Qualcomm Inc shares fell about 3% on Wednesday as investors got their first look at the bottom line impact of a patent fight settlement with Apple Inc .

The stock kept most of the 50%-plus gains of the past few weeks, reflecting investor relief at a deal between the cellphone technology companies, but Qualcomm's forecasts suggested Apple's licensing fees will not be a big boost to revenue.

Qualcomm will book a one-time payment of $4.5 billion to $4.7 billion in the fiscal third quarter from the settlement, as Apple catches up on royalties that the iPhone maker did not pay while they were locked a legal dispute.

Excluding that payment, Qualcomm estimated $4.7 billion to $5.5 billion in revenue, with a midpoint slightly below the $5.29 billion analysts were expecting, according to IBES data from Refinitiv.

"We see a pause ahead of a 5G launch," Cristiano Amon, Qualcomm's chip chief, said on a conference call with investors, referring to the next generation of mobile networks that will roll out over the course of this year and next.

The settlement, which includes a six-year patent license and a chip supply agreement, is expected to generate $2 per share in additional earnings, Qualcomm has said. Financial details have not been disclosed but the deal is expected to help Qualcomm regain the preeminent mobile chip position it held in the early 2010s.

Qualcomm estimated $1.23 billion to $1.33 billion in revenue for its licensing business in the third quarter, with a midpoint slightly above analysts' consensus forecast of $1.22 billion according to Refinitiv data.

The licensing revenue outlook includes royalties from sales of Apple products. Apple on Tuesday said its gross margin guidance, which was largely unchanged from previous quarters, included the Qualcomm settlement. Taken together, the two disclosures suggest that the patent licensing deal had little short-term financial impact.

Qualcomm executives said a gloomier smartphone market forecast offset the addition of Apple license revenues. Stacy Rasgon, an analyst with Bernstein, said the Apple settlement was in line with expectations but the revenue outlook was disappointing.

"That tells me that either Apple isn't giving them all that much, or it says the core market is horrendous, or maybe a little bit of both," Rasgon said.

But shareholders welcomed the Apple deal.

"I'm just pleased to have Apple back in the fold," said Hal Eddins, chief economist at Capital Investment Counsel, which holds both Apple and Qualcomm shares. "I think they both came out well in the deal and am very impressed (Apple Chief Executive Tim) Cook agreed to it."

Shares dipped 2.7% to $84.00 in after-hours trading. Before the close, Qualcomm shares had risen more than 50% since the company announced its settlement with Apple on April 16.

Qualcomm remains in a license dispute with Huawei Technologies Co Ltd, but the Chinese company has been making interim payments as negotiations continue. Qualcomm resolved a dispute with Samsung Electronics Co Ltd last year.

"We feel that the Apple resolution enhances our ability to resolve issues with Huawei," Alex Rogers, Qualcomm's patent licensing chief, said on a conference call with investors.

Qualcomm is awaiting a federal judge's decision in a U.S. Federal Trade Commission lawsuit alleging antitrust violations that mirrored Apple's claims. The outcome remains unclear after Apple, the major source of witnesses in the case, dismissed similar lawsuits of its own.

Net income attributable to Qualcomm rose to $663 million, or 55 cents per share, in the quarter ended March 31, from $330 million, or 22 cents per share, a year earlier.

Revenue fell to $4.88 billion, but beat analysts' estimates of $4.80 billion.

(Reporting by Sayanti Chakraborty in Bengaluru; Editing by Sriraj Kalluvila and Richard Chang)