Qualcomm Projects In-Line Sales Supported by Move to 5G
(Bloomberg) -- Qualcomm Inc., the biggest maker of chips used in smartphones, gave a sales forecast in line with analysts’ estimates, indicating the company is getting a lift from the move to next-generation 5G wireless systems.
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. Qualcomm’s outlook follows more dire forecasts by chipmakers Intel Corp. and Nvidia Corp.
“There was strong performance from our chipset business,” Chief Executive Officer Steve Mollenkopf said in an interview. Still, he said Qualcomm isn’t immune to the economic slowdown affecting its peers. “We are seeing some impact, like the rest of the industry, from market weakness.”
Earlier this month, Qualcomm said it was on target to become the leading supplier of technology for 5G phones, with its chips expected to be part of 30 devices tied to the new, faster networks later in 2019.
- 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 percent 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 2 percent in extended trading after the results were released. Qualcomm’s stock is down 12 percent this year, closing Wednesday at $50.17 in New York.
- Mollenkopf said that concerns about waning smartphone demand in China was “largely a calendar ’18 story. Chinese handsets will see relatively flat demand in 2018 to 2019; 2018 was down more than 10 percent.”
- The CEO added that Qualcomm made progress in resolving its licensing revenue dispute with Huawei Technologies Co., one of the world’s largest phonemakers.
- “We signed in the middle of the quarter a new interim agreement with Huawei, which is a bit better than before,” Mollenkopf said. “We had up until last quarter $100 million a quarter. We have now signed a new agreement at $150 million.”
- For more details on the results, click here.
- Read the statement here.
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