Jeff Kagan: Shame on Apple for Qualcomm Attack

Jeff Kagan  |

Now that a few weeks have passed since Apple  (AAPL) and Qualcomm  (QCOM) made up, the truth is becoming clear. The bottom line with this two-year battle is that Apple is a bully who shot themselves in the foot. Qualcomm is the same important industry leader they have always been. So, why did Apple do such a dirty and self-destructive thing to Qualcomm?

This will only hurt Apple going forward for years to come. They acted like a mafia hitman from the Godfather. In fact, similar behavior by Microsoft led to their government ordered break-up (subsequently settled upon appeal) in the 1990s. Is that the path they really want to take?

Eventually, Apple finally did the right thing. They are working with Qualcomm once again. However, I don’t think it was by choice. They were backed into a corner and forced to do so.

Coopetition is becoming self-destructive to Apple

If I were Qualcomm, I wouldn’t trust Apple as far as I could throw them. This coopetition business seemed to make sense years ago, but now it seems to be spinning out of control. It’s like dealing with someone with an illness. One day they are your best friend and the next they are your enemy.

In fact, if I were any supplier to Apple, I would think the same way. These unwarranted attacks have created a very unhealthy business environment. Trust has been broken. There is no room in this industry for this kind of bad behavior.

Since the passing of Steve Jobs, I grew to admire Tim Cook and what he has done for Apple. He has done a great job building the value of Apple in the marketplace. They have done so much right.

However, this behavior is wrong and should be stopped.

Apple returning to Qualcomm is proof there is no problem

What makes even less sense is Qualcomm isn’t a competitor to Apple. In fact, they are a key supplier. Yes, Apple needs Qualcomm. That’s why they ultimately came to terms.

Today, the bottom line appears to be this. Apple going back to Qualcomm shows us there is no problem with the gear. Otherwise Apple would have steered clear.

So, why in the world would Apple try and hurt a main supplier, when this is actually a company they need?

Let’s pull the camera back at take a look at this from a longer-term, historical perspective. Let’s look at the new game Apple is playing.

On one hand, competition is good. On the other hand, coopetition is not good if it makes one company try to put another company out of business. Especially when one company needs the other. That should be for the market to decide, not a competitor.

Why did Apple create false view about Qualcomm?

Over the last few years Apple has been loudly complaining that Qualcomm chips were too expensive and not good enough. However, it appears quietly they knew that was not the case.

I have read in the news that emails from Apple executives show these complaints were not real. They were only political. Trying to achieve a goal. Even if that meant hurting another important company.

Why would they do that? By trying to damage Qualcomm, Apple ultimately damaged themselves. Their own brand and reputation.

By shooting themselves in the foot, Apple has damaged their own ability to compete and to build their company through partnering with other companies. After all, what supplier would ever trust them going forward?

Apple's lies about Qualcomm unveiled by Intel exit

The real problem is Apple's own fault. It has to do with slowing iPhone growth. This has created a desperate attempt to find new growth in other areas, without regard to who they hurt along the way. I’ll explain why iPhone growth is slowing in a minute.

One reason this house of cards spun out of control was that Intel was exiting the iPhone chip business. Intel was the company that took the place of Qualcomm with Apple a couple years ago.

Intel’s CEO explained on CNBC that the reason for their exit was they simply couldn’t make enough money to make the 5G chip business profitable.

That must be the point when Apple considered acquiring the Intel 5G chip business.

This is a key point in this story. If they did, then Apple and Qualcomm would become competitors. Maybe that’s why Apple acted so badly toward Qualcomm. But that never happened.

If it did, it would be more understandable why Apple would build themselves up while cutting down the competition. Of course, even this would have been very short-sighted. If they ever wanted to exit the chip business, who could they turn to for their iPhone, iPad and more?

Bottom line, since they didn’t acquire the 5G chip business from Intel, Apple now needs Qualcomm once again.

So, now Apple is sorry. Funny juxtaposition, wouldn’t you say? Suddenly they need to make peace, so they want to forget the war they created over the last two years. Someone please give Apple a towel so they can wipe the egg off their own face.

This is why Apple should be ashamed of itself. This is why Qualcomm needs to protect itself against more Apple backlash in the future. In fact, this should be a lesson for every supplier to Apple. They all need to remain aware that a relationship with Apple is shaky at best.

Apple revealed there is no problem with Qualcomm chips

So, by settling with Qualcomm, and paying them billions of dollars they owed and by working with them going forward once again, Apple was forced to admit there was no real problem with these chips and technology. It was all political. Imagine that.

After all, if there was really a problem, they never would have gotten back together again. After all, they have to protect their brand, right?

In the end, this is a very embarrassing mistake for Tim Cook and Apple.

The real Apple iPhone slow growth problem

The real problem is slower iPhone growth. This slowdown was expected by me and others. It was caused by higher prices and less innovation.

True, iPhone sales may have reached their peak, but the slowdown would have been slower and more manageable except Apple dramatically increased prices on new devices. Plus, their innovation slowdown has been so abrupt.

In other words, suddenly the iPhone costs too much and it does not have enough innovation to attract users to upgrade as quickly as they did years earlier.

This created a self-imposed crisis that Apple had to fix. This crisis had nothing to do with Qualcomm, who became the target of their attempt to shift our eyes from Apple’s own mistakes.

So, that’s why I think Tim Cook and Apple should be ashamed of themselves for trying to hurt Qualcomm to find new areas of growth. Qualcomm is an important supplier in the wireless industry. Who will be their next target?

This kind of cloak-n-dagger behavior should be left to science fiction writers, not real-life companies and CEOs with customers, workers and investors. They could have hurt Qualcomm and in fact the entire industry.

So, while I still admire Apple and Cook for Apple's growth until this antic, I don’t like what they did here. Not at all. They gave themselves a black eye. They don’t seem to have self control. What do you think?


Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at jeff@jeffKAGAN.com. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan.

DISCLOSURE: The views and opinions expressed in this article are those of the author, and do not represent the views of equities.com.


The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
QCOM QUALCOMM Incorporated 66.21 -2.05 -3.00 21,419,953 Trade
AAPL Apple Inc. 178.97 -0.69 -0.38 23,714,686 Trade

Comments

Watchlist

Symbol Last Price Change % Change
AAPL

     
AMZN

     
HD

     
JPM

     
IBM

     
BA

     
WMT

     
DIS

     
XOM

     

World Economic Forum at Davos 2019 - Dr Oliver Krause Founder Untitled Inc Part 1

Matt Bird sits down with Dr Oliver Krause, Founder Untitled Inc, in part 1 of this 2 part interview at the World Economic Forum at Davos 2019