Qualcomm Trusts the Move to 5G Will Offset the Blow of a Decline in Smartphone Demand
Qualcomm., the biggest maker of chips used in smartphones, gave a sales forecast in line with analysts’ estimates, indicating the move to next generation 5G wireless systems is helping offset declining smartphone demand.
Fiscal second-quarter revenue will be $4.4 billion to $5.2 billion, the San Diego-based company said Wednesday in a statement. Analysts on average estimated $4.83 billion, according to data compiled by Bloomberg. (QCOM) Qualcomm’s outlook follows more dire forecasts by chipmakers Intel Corp. and Nvidia Corp.
“We continue to execute on our strategic objectives, including driving the global transition to 5G, protecting the established value of our technology and inventions and expanding into new industries and product categories,” Chief Executive Officer Steve Mollenkopf said in the statement.
Qualcomm said adjusted earnings per share will be 65 cents to 75 cents a share in the period ending in March. Analysts had projected profit of 78 cents.
The company’s earnings and outlook provide a window into demand for products made by some of the world’s biggest technology companies such as Samsung Electronics Co. While the majority of Qualcomm’s sales come from chips that are the brains of smartphones, license revenue from patents that cover the fundamentals of how modern high-speed data phone systems work provide the bulk of the company’s profits. Qualcomm reported that revenue declined 20% to $4.84 billion in the fiscal first quarter. Its chip business had sales of $3.74 billion while the licensing unit generated $1.02 billion. The technology licensing is central to regulatory action and lawsuits by Apple that argue Qualcomm has illegally used its position as a major chip supplier to force phone makers to pay inflated fees. Arguments in an antitrust trial brought by the U.S. Federal Trade Commission against the company ended Tuesday. Apple, which brought a similar suit, isn’t paying licensing fees. The chipmaker has brought various patent suits against the iPhone maker in retaliation aimed at achieving a settlement.
The shares rose about 3% in extended trading after the results were released. Qualcomm’s stock is down 12% this year, closing Wednesday at $50.17 in New York.