Qualcomm profit tops estimates on higher modem chip sales
U.S. chipmaker Qualcomm Inc`s
But CEO Steve Mollenkopf acknowledged publicly that a critical deal may ultimately be caught up in broader trade tensions between the United States and China, saying that a delay in Chinese regulatory approval of Qualcomm`s $44 billion proposed acquisition of NXP Semiconductors
The results announced on Wednesday, particularly in Qualcomm`s smartphone chip business, were in contrast to those from major mobile phone components makers in Asia including TSMC and SK Hynix Inc , which have warned of slower growth in their smartphone chip divisions.
While revenue from Qualcomm`s modem chips business - its largest - rose 6 percent in the three months ended March 25, revenue from its licensing business plunged 44 percent, reflecting the loss of revenue due to a high-profile patent battle with Apple Inc
Qualcomm said it sees about 5 percent growth in modern mobile handsets for the remainder of the year, which is lower than anticipated.
But Mollenkopf said the company`s chip sales business in China was good despite a softer market there overall and some weakness in modem shipments. As a whole, he said handset selling prices continue to be stronger than expected, a favourable trend.
"As we navigate in the short-term industry weakness in (Qualcomm`s chip business), we continue to execute well on that business and our market share remained strong," Mollenkopf said.DEAL WOES CLOUD OUTLOOK
"Qualcomm posted solid results, but its guidance pointed to a softer handset market, particularly in China, and underscores the significance of closing the pending NXP acquisition, which remains caught up in a lengthy regulatory review," said Moody`s Senior Vice President Rick Lane.
Qualcomm last week said that regulatory approval for the NXP deal from Chinese regulator MOFCOM would again be delayed. Mollenkofp said Qualcomm still believes the deal will be done and that if it is not, Qualcomm plans to use the cash dedicated to it for a share buy-back.
"I think the issue is probably more related to the higher level discussions between the countries as opposed to any individual issue related to MOFCOM," said Mollenkopf in a response to an analyst question about the deal. "I think the environmental issues between the countries are probably more the situation today than anything else."
The results come as San Diego-based Qualcomm tries to convince shareholders it can boost earnings by cutting annual costs by $1 billion and resolving the Apple dispute.
While approval for the NXP deal and resolution of the Apple cases remain paramount for shareholders, Hal Eddins, chief economist for North Carolina-based Qualcomm shareholder Capital Investment Counsel, said he was "pleasantly surprised" by Qualcomm`s results.
"I feel it`s important to reestablish their solid fundamentals after the reversal the stock has seen over the last two months," Eddins said. "At the end of the day, I feel they`ll work out a deal with Apple but it will take time. I want to have a strong base under the stock until then."
Qualcomm on Wednesday forecast current-quarter revenue of between $4.8 billion and $5.6 billion, and adjusted earnings of 65 to 75 cents per share. Analysts were expecting revenue of $5.32 billion and earnings of 75 cents per share, according to Thomson Reuters I/B/E/S.
Qualcomm`s quarterly net income fell to $363 million, or 24 cents per share, from $749 million, or 50 cents per share, a year earlier.
Excluding one-time items, Qualcomm earned 80 cents per share, ahead of analysts` average estimate of 70 cents, according to Thomson Reuters I/B/E/S.
Total revenue rose 4.9 percent to $5.26 billion, topping expectations of $5.19 billion.
Qualcomm shares rose 1 percent to $50.25 in after-hours trading on Wednesday.
The sentiment also appeared to help boost other chipmakers in after-hours trading, with memory chipmaker Micron Technology
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.