Qualcomm Predicts Profit, Sales That May Fall Short of Analyst Estimates

Photographer: Daniel Acker/Bloomberg

Paul Jacobs, chief executive officer of Qualcomm Inc., holds a device streaming CBS mobile television while speaking at the 2010 International Consumer Electronics Show (CES) in Las Vegas, Nevada, on Jan. 8, 2010. Close

Paul Jacobs, chief executive officer of Qualcomm Inc., holds a device streaming CBS... Read More

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Photographer: Daniel Acker/Bloomberg

Paul Jacobs, chief executive officer of Qualcomm Inc., holds a device streaming CBS mobile television while speaking at the 2010 International Consumer Electronics Show (CES) in Las Vegas, Nevada, on Jan. 8, 2010.

Qualcomm Inc., the biggest maker of chips that run mobile phones, forecast sales and earnings that fell short of analysts’ predictions, signaling consumers may be opting for handsets that are less profitable for the company.

Qualcomm fell as much as 8.5 percent in late trading after projecting profit of 40 cents to 44 cents a share for this quarter. Analysts predicted 44 cents, according to the average estimate in a Bloomberg survey.

Most of Qualcomm’s profit comes from technology licenses tied to mobile-phone prices, which are under pressure as demand rises faster in regions where phones sell for less, said Mark McKechnie, a Broadpoint Amtech Inc. analyst in San Francisco. Growth may also be constrained as consumers choose Apple Inc.’s iPhone instead of devices made by Qualcomm customers.

“The U.S., Europe and Japan are still depressed and these are the higher average-selling-price regions,” said McKechnie, who recommends buying the shares and said he doesn’t own any. “The hope is that the higher price markets will come back, but from this report it doesn’t look like they’re seeing signs of that.”

Qualcomm fell as much as $3.64 to $38.99 in late trading, after closing at $42.63 on the Nasdaq Stock Market. The stock has lost 7.9 percent this year.

The company’s customers include Suwon, South Korea-based Samsung Electronics Co. and Seoul-based LG Electronics Inc., two of the top three mobile-phone makers.

Falling Prices

Apple reported this week that iPhone sales more than doubled to $5.45 billion and accounted for 40 percent of the company’s revenue last quarter. The iPhone’s chip suppliers include Samsung, Marvell Technology Group Ltd. and Infineon Technologies AG.

Global unit sales of smartphones, such as the iPhone, may jump 46 percent this year, compared with growth of as little as 11 percent for the total mobile-phone market, Stamford, Connecticut-based research firm Gartner Inc. predicted Feb. 23.

Sales this quarter will be $2.5 billion to $2.7 billion, Qualcomm said in a statement today. Analysts had projected $2.66 billion on average.

The average price of a phone using Qualcomm’s technology will probably drop to about $185 this year, according to the midpoint of the company’s forecast. Qualcomm lowered the midpoint from $187.

Second-Quarter Results

Net income was $774 million, or 46 cents a share, in the three months ended March 28. That compares with a loss of $289 million, or 18 cents, a year earlier, when the company paid to settle a patent case with Broadcom Corp. Sales last quarter rose to $2.66 billion.

Analysts had predicted profit of 46 cents a share on sales of $2.63 billion. Qualcomm had raised its forecasts for the second quarter on March 25, citing stronger-than-expected licensing and sales.

The company gets the majority of its revenue from supplying chips to phone makers. Most of its profit comes from license fees paid by makers of phones, phone equipment and semiconductors, which use Qualcomm’s code division multiple access technology.

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net

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