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Qualcomm Alleges Trade Secret Theft by Apple for Intel Gain

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In the latest twist to a prolonged legal battle between QUALCOMM Incorporated (QCOM - Free Report) and Apple Inc. (AAPL - Free Report) , the former alleged that the latter has stolen its trade secrets related to chip-making software for the benefit of a third-party service provider. The fresh charges against the iPhone maker will likely make the legal battle murkier and further embroil the patent dispute into a long-drawn judicial process.  

Qualcomm has accused Apple of misusing its secret software access to share information about its chips to Intel Corporation (INTC - Free Report) engineers. This would supposedly benefit Intel to develop competitive modem chips for use in several iPhone models, thereby enabling Apple to entirely get rid of Qualcomm products from its portfolio with which it was entangled in a patent dispute.

To support its allegations, Qualcomm claimed that its modems required a combination of chips and software to allow phones to receive wireless data, owing to which it gave Apple access to its source code and software development tools to help it modify the software for iPhone compatibility. However, instead of honoring its commitment, Apple vilified its trust and allegedly shared this confidential information to Intel.  

Qualcomm further added in its recent filing that Apple passed on the information about its ‘log files’ to Intel to enable it gain critical technical knowhow. The log files typically contained rows of data generated by computer hardware or software in order to help engineers analyze any technical problems to optimize the performance of a chip.

With such classified information, Intel chips were reportedly able to significantly improve performance and replaced Qualcomm's modem chips first in iPhone 7 launched in 2016. The recent launches of iPhone XS, XS Max and XR are believed to be solely based on Intel's XMM 7560 4G modem.

The company expects that the fresh charges would be allowed by the judges to be added to the already long list of allegations to avoid filing a separate legal case. An administrative law judge is expected to give verdict in one of the International Trade Commission (“ITC”) suits filed by Qualcomm on Sep 28, following which it would likely go to the ITC panel for a final ruling. It remains to be seen whether the latest salvo by Qualcomm will have any impact on the outcome of the case.

Qualcomm has outperformed the industry in the past year with an average return of 41.1% compared with a rise of 31.4% for the latter.

Qualcomm currently has a Zacks Rank #2 (Buy). Another top-ranked stock in the industry is Juniper Networks, Inc. (JNPR - Free Report) , carrying a Zacks Rank #2. Juniper has long-term earnings growth expectation of 5.7%. It delivered an average positive earnings surprise of 4.9% in the trailing four quarters.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy)stocks here.

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