Investors Wants Answers on Qualcomm Stock Plunge

WILMINGTON, Del. (CN) — Compounding antitrust liability at home and abroad, Qualcomm’s misrepresentations about its microprocessor’s overheating problems have sent the chipmaker’s stock into a tailspin, investors claim in a federal class action.

“Qualcomm’s stock price has never fully recovered from defendants’ misconduct and currently trades for around $57 per share,” the 131-page complaint states, filed on May 24 with a federal judge in Delaware.

This is a drop of roughly 30 percent from the company’s recent high of $81.97 per share, lead plaintiff James Hays says. Hays brought the complaint against 22 of the San Diego-based company’s officers, saying they have improperly refused his call for an investigation.

Detailing Qualcomm’s parade of mishaps, Hays notes that the company paid $975 million — the largest settlement in Chinese history — to settle an antitrust dispute in 2015.

The next year, South Korean regulators fined Qualcomm a record $868 million for similar conduct.

Antitrust investigations of Qualcomm are also underway in the European Union, and in the United States earlier this year Qualcomm was hit with federal antitrust complaints from the Federal Trade Commission and from Apple.

Hays says Qualcomm’s botched launch of the microprocessor Snapdragon 810 compounded these problems.

“Defendants knew, but failed to disclose, that under their direction and on their watch, the Snapdragon 810 was plagued with design and operational problems from inception, including severe and highly abnormal overheating problems that fundamentally compromised its performance and functionality and called into question the ultimate viability of the chip,” the complaint states.

Hays says Qualcomm was aware of the problems but nevertheless “rushed Snapdragon 810 to market and continued to take aggressive shortcuts in the typical design process, making it almost certain that the chip would overheat and/or compromise functionality crucial to the chip’s overall success.”

News that Samsung would not use the Snapdragon 810 in its Galaxy S6 smartphone began to swirl in early 2015, but Hays says “Qualcomm’s stock price remained artificially inflated by defendants’ continuous and steady barrage of false representations, omissions, and deceptive denials.”

The truth finally came out in July that year, according to the complaint.

“Defendants caused Qualcomm to disclose that, as a result of the problems with the Snapdragon 810 and the resulting loss of share in the Samsung Galaxy S6, the company’s QCT segment would again miss expectations by a wide margin, and that as a result of the 810’s failures, QCT’s competitive outlook for the remainder of the year had been significantly weakened,” the complaint states.

Hays says the defendants’ breaches caused Qualcomm to suffer a severe loss of reputation and standing, as well as a diminishment in the price of its common stock.

A spokesman for the company has not returned a voicemail seeking comment. 

The class wants Qualcomm’s officers to provide restitution and disgorge any profits tainted by their misconduct. They are represented by Brian Long with the firm Long & Rigrodsky in Wilmington. 

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