Qualcomm profit beats estimates but weak China mobile sales weigh on outlook

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Chipmaker Qualcomm Inc’s profit and revenue beat expectations as demand surged for its chips used in smartphones and cars, but an earnings forecast for the current quarter fell below analysts’ estimates due to tepid mobile sales in China.

China’s smartphone market in 2017 was weaker than expected with 4G handset shipments down 11 percent, according to Bernstein analyst Stacy Rasgon.

Chinese cellphone brand OPPO on display /VCG Photo

“Performance of the current quarter is weighed down by Apple and China,” Stifel analyst Kevin Cassidy said.

“If there wasn’t the Broadcom bid the stock might be down 5 percent instead... I don’t think investors are focused really on the near term operating results or even guidance at this point,” he said.

Shares of the company were marginally lower in late trade.

The company’s CDMA technologies unit, its largest business, saw a 13 percent rise in revenue to 4.65 billion US dollars in the first quarter ended Dec. 24. But licensing revenue dropped 28 percent to 1.30 billion US dollars, weighed down by a dispute with Apple Inc.

/Reuters Photo‍

Apple sued Qualcomm last January, accusing it of overcharging for chips and refusing to pay some 1 billion US dollars in promised rebates.

“We remain open to finding a path to resolution (with Apple),” Qualcomm Chief Executive Steve Mollenkopf said on a call with analysts.

The company forecast second-quarter revenue of 4.8 billion to 5.6 billion US dollars and adjusted earnings per share of 65 cents to 75 cents, below analysts’ estimates for revenue of 5.58 billion US dollars and earnings of 85 cents, according to Thomson Reuters I/B/E/S.

In the first quarter, Qualcomm posted a net loss of 5.95 billion US dollars due to a 6 billion US dollars charge for new US tax laws and a 868 million US dollars charge for a fine imposed by the Korea Fair Trade Commission.

Excluding items, Qualcomm earned 98 cents per share, topping analysts’ average estimate of 91 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 1.2 percent to 6.07 billion US dollars and exceeded estimates of 5.93 billion US dollars.

Qualcomm is in the midst of closing its long-pending 38 billion US dollars deal to buy automotive chip maker NXP Semiconductors. In November, it rebuffed a 103-billion US dollars takeover bid by Broadcom Ltd.

Source(s): Reuters