Qualcomm Inc forecast current-quarter profit below analysts’ expectations as demand weakens for its chips used in mobile devices in a slowing market. The company, whose customers include Apple Inc, said it expected its mobile chip shipments to fall by 16-25 percent in the second quarter from a year earlier.
Qualcomm also expects 3G and 4G device shipments to decline by 4-14 percent, hurting its licensing revenue. The chipmaker’s weak outlook comes after Apple forecast its first quarterly revenue drop in 13 years and reported the slowest-ever rise in iPhone shipments as the critical Chinese market shows signs of weakness.
The company trimmed its estimates for “premium tier shipments” due to “slower than expected sell-through at a large” customer, it said on a post-earnings conference call. Qualcomm’s mobile chip shipments fell 10 percent in the first quarter, pulling down its equipment and services revenue by 21.6 percent.
Revenue from licensing declined 10.4 percent. “I think on licensing it’s getting really fuzzy; they’re not suggesting any upside to licensing, which I think is what people really wanted to see before getting excited in the stock again,” Bernstein analyst Stacy Rasgon told Reuters.
Qualcomm said in December it had decided not to split its slowing chipmaking business from its technology licensing business.
Qualcomm forecast an adjusted profit of 90 cents to $1.00 per share for the second quarter, below the average analyst estimate of $1.01, according to Thomson Reuters I/B/E/S. Its revenue forecast of $4.9 billion-$5.7 billion was also largely below analysts’ expectations of $5.68 billion.
The net income attributable to Qualcomm fell 24 percent to $1.50 billion, or 99 cents per share, in the quarter ended Dec. 27. Excluding items, the company earned 97 cents per share, topping the average analyst estimate of 90 cents, as it aggressively slashed costs. Revenue fell 18.7 percent to $5.78 billion.
As this report by Bloomberg Business notes, Qualcomm is facing the fire at two ends — the slowing down of overall market and competitors churning out chips that have an edge over Qualcomm on either price or performance factors. And all this while the top three smartphone makers — Samsung, Apple and Huawei are increasingly designing their own parts, further lessening the demand, notes the report.
Chief Executive Officer Steve Mollenkopf has been trying to halt and reverse sales declines that have cut Qualcomm’s revenue by more than 10 percent for three straight quarters. Bloomberg Business also reports that he’s trying to get Qualcomm’s technology into new markets such as servers, cars and medical devices as the company’s main phone-chip business becomes more competitive and overall growth slows.
With inputs from Reuters
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