Qualcomm plunges 12% on word of Apple's $1 billion lawsuit

Qualcomm is down 12.63% at $54.95 a share following word that Apple is suing the company for $1 billion.

Apple announced last Friday that it is suing Qualcomm, according to a lawsuit filed in federal court seen by Business Insider.

Apple buys wireless modem chips from Qualcomm and pays it licence royalties to use its wireless patents.

Apple is accusing Qualcomm of withholding $1 billion in rebates under a deal they had struck to keep Qualcomm modems in Apple products, including the iPhone and iPad.

Both Apple and the Federal Trade Commission, which also accused Qualcomm of monopolizing its part of the chip market, say that Qualcomm is “double-dipping” on charging for its technology, and has been for the better part of the past decade.

Analysts at Bernstein believe this suit suggests that Apple may drop Qualcomm as a supplier completely. “The filing also doesn’t read well for the future of Qualcomm’s chipset business with Apple. It alleges that Apple has been willing, and able to use competing solutions for years,” the analysts wrote.

The analysts are bearish on Qualcomm, lowering their target price to $65 from $80 ahead of the company reporting earnings on Wednesday. “But we have a hard time spinning a war with [Apple, Qualcomm’s] largest customer as anything but a clear negative,” the analysts wrote.

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