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They prepare the parrot elegantly and then present it to the drunk customer who then says, “that looks great, now cut me off 25 cents worth”.   (You know I never found that joke funny because I figured at that point the restaurant owner likely pulled out a gun and shot the customer).

What Apple wants is apparently the value of what Qualcomm provides but they want to dictate the price they pay and given their massive wealth and market power they feel they can make this happen.  But….

Short Term Benefit

Now, were Apple successful (which, fortunately for Apple, seems doubtful) every other firm would likely demand the same cut rate deal.  This would clearly cripple Qualcomm’s ability to provide technology reducing Qualcomm’s market cap sharply.  But the firm would still have value and companies like Alphabet (Google’s parent), Microsoft, Samsung, and Lenovo (Motorola) would likely move in aggressively to buy the firm.  None of these firms think that kindly of Apple and might decide to simply not license this core technology to Apple anymore.

Apple, in defense, would have to enter this bidding war so that the iPhone wasn’t effectively locked out of having access to Qualcomm’s technology.  And facing a firm that was even better funded than Qualcomm that was and less likely to license anything to Apple would be, given Apple’s dependence on the iPhone, a going out of business strategy.

So, if Apple won they’d maybe get two quarters of unique savings which they wouldn’t pass on to customers and use to spike their margins, but within a year, would have to either outbid firms that also have massive war chests, or face the possible collapse of the iPhone.

Now in their head they may be thinking that by crippling Qualcomm they’ll cripple all their competitors who are more dependent on that company but given how well funded the Japanese, Chinese, Koreans, Google, and Microsoft are I just think that outcome will be short lived and highly transitory.  Oh, and given the bidding war, the market may think that Apple overpaid for Qualcomm doing to Apple stock what the attempted Yahoo purchase years ago did to Microsoft’s.  This will make it hard for Apple to win the bid because it will make the effective cost to Apple far higher than just the money they spend for the firm.

Wrapping Up:  Tactical Thinking

I get that Apple thinks Qualcomm is overcharging them but the charges are consistent for the industry so getting rid of any part of them would only provide a short term competitive benefit to Apple.  On the other hand, Apple’s actions, if they fail, could cost them massively in terms of iPhone sales, and, if they succeed, it could either block them from access to critical patents or force them to buy Qualcomm at a massive premium to prevent that outcome.  Neither of these two paths are ideal.