The Strategist

Qualcomm reports a decline in profits

07/20/2017 - 14:55

Quarterly results of the manufacturer of mobile chips Qualcomm surpassed expectations of Wall Street. However, the company's forecast was worse than analysts' estimates, which caused a 2.3% drop in shares.

Maurizio Pesce
Maurizio Pesce
Net profit of one of the world's largest manufacturers of components for mobile devices Qualcomm Incorporated for the nine months of 2016-2017 fiscal year (ended June 26) fell 1.79 times compared to the same period last fiscal year and amounted to $ 2.296 billion, the company said.

The diluted earnings per share for the nine months were $ 1.54 compared to $ 2.74 a year earlier. Revenue also fell by 5.66%, to $ 16.387 billion.

In the three-month reporting period expiring on June 25, 2017, the chip maker's net profit fell significantly to $ 866 million, or 58 cents per share, from $ 1.44 billion, or 97 cents per share a year ago. Qualcomm's revenue declined 11% year-on-year to $ 5.4 billion, and adjusted earnings (non-GAAP) were 83 cents per share.

At the same time, analysts expected earnings per share of 81 cents and revenue of $ 5.26 billion amid prolonged litigation with Apple.

Sales at Qualcomm's CDMA Technologies division, where chips are produced, climbed up by 5% to $ 4.05 billion. At the same time, revenue of the technology licensing department decreased by more than 42%, to $ 1.17 billion.

However, the chip maker's forecast for the current quarter did not meet expectations. Qualcomm expects to receive adjusted earnings of 75 to 85 cents per share and revenues from $ 5.4 billion to $ 6.2 billion. Experts forecast a profit of 90 cents per share on revenue of $ 5.48 billion.

The company explained that the forecast does not include licensing revenues related to sale of Apple products by contract manufacturers and other unspecified licensees participating in the patent conflict.

At the beginning of the decade, Qualcomm demonstrated high growth rates. Nevertheless, concerns about its ability to continue to provide stable growth have reduced the company's market value.

The company’s market value fell by almost half during the 18-month period of decline, starting from August 2014, when the shares reached a maximum of $ 82, until February 2016, when the stock dropped to a minimum at $ 42. The revenue growth of the company decreased by approximately 20% over the 12-month reporting period.

In the second half of 2016, Qualcomm resumed growth, but then the largest chipmaker client, Apple, filed a $ 1 billion claim, accusing Qualcomm of violating competition law "by levying royalties on technology that they have nothing to do with." As a result of the charge, the chip manufacturer's shares fell from $ 71 to $ 50 and began to trade in the range from $ 50 to $ 60.