BlackBerry Wins Settlement Against Qualcomm

BlackBerry announced today that it has won an arbitration hearing between it and chipset manufacturer Qualcomm.  This stems from the royalty fees paid to Qualcomm by BlackBerry for the use of its various chipsets in various BlackBerry devices.  On 20 April 2016, both sides agreed to arbitrate the dispute and between 27 February and 3 March 2017 the hearing was held. 

The announcement states that the arbitrator dictated approximately $815 million was the settlement.  Which equates to approximately $1.38 per fully diluted share.  John Chen had the following statement regarding the settlement:

"BlackBerry and Qualcomm have a longstanding relationship and continue to be valued technology partners. We are pleased the arbitration panel ruled in our favor and look forward to collaborating with Qualcomm in security for ASICs and solutions for the automotive industry."

From a Qualcomm perspective this is going to be quite interesting.  BlackBerry is just a drop in the bucket as a customer base.  If larger partners, such as Samsung, were to follow-suit then it could mean serious financial trouble for the company.

In terms of what this deal means for BlackBerry though, it does not mean much.  This is just one lump-sum payment and will be nothing more. There will be no increase of revenues nor profit margins due to this settlement; since, for all intents and purposes, BlackBerry has exited the hardware market.  However, what could be interesting is to see if the company pulls the trigger on any acquisition it may have lined up.  With over $800 million forecasted cash in the bank, this puts BlackBerry’s cash position well over $2 Billion. A number which John Chen seems to be more comfortable below than above.

Since the announcement the company’s stock has jumped close to 17%, relative to the infused cash, but I expect it will slowly dip down and settle much lower.  Let’s keep in mind that the announcement has absolutely nothing to do with its ongoing operations but simply a back pay of over spending.