Qualcomm Sees Buoyant Smartphone Demand, Rising Prices
Stock Chart for QUALCOMM Inc (QCOM)
Qualcomm Inc., the biggest maker of mobile-phone chips, expects average phone prices to rise as consumers in emerging markets step up buying of handsets that allow fast-Web access, Chief Executive Officer Paul Jacobs said.
“The whole price curve is going to end up moving up,” Jacobs said in an interview at Bloomberg’s headquarters in New York. “The growth looks good. The mobile industry seems to be doing OK.”
Qualcomm, which gets most of its profit from licensing mobile-phone technology, stands to gain as rising demand for smartphones lifts the price of devices, Jacobs said. His remarks counter concerns voiced by analysts including Cody Acree, of Williams Financial Group, that the chipmaker’s margins would get squeezed by a shift to lower-priced phones.
Jacobs, 48, said prices will be buoyed by smartphone sales in countries including India and China, as well as demand in more developed economies.
Qualcomm, based in San Diego, fell 49 cents to $46.38 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares are little changed this year, lagging behind other chipmakers including Intel Corp., as investors fret that Qualcomm’s profitability is under pressure.
“I would look for those price concerns to raise themselves again,” said Acree, who has a “hold” rating on Qualcomm stock.
Jacobs is in New York ahead of the company’s annual analyst day tomorrow. The company owns rights to license code division multiple access, or CDMA, the fundamental radio technology used in so-called 3G phones and networks.
The average price of a phone using Qualcomm’s technology will probably be about $192 this quarter, the company said this month. That’s up from about $182 in the previous period.
Consumer purchases of smartphones in developed markets are rising as the global economy rebounds, Jacobs said. Less- expensive data plans from service providers may also perk up sales, he said. In India and other developing economies, new networks offering faster Internet access are also fueling sales of more expensive phone models, he said.
Qualcomm can keep delivering “double-digit” sales growth as phone connections make their way into new devices including tablet computers, cars and even medical equipment, Jacobs said.
Revenue will grow 13 to 18 percent in its current fiscal year, Qualcomm has said. That would be more than double the 6 percent increase last year to $11 billion.
Under Jacobs, who took over as CEO from his father in 2005, Qualcomm has tried to lessen its dependence on mobile phone chips. One of its efforts, the MediaFLO mobile-television service, hasn’t met Qualcomm’s targets. The company is now considering options that include selling it off, forming a joint venture or closing it down, Jacobs said.
“It’s conceivable if we get a good offer we sell the spectrum and shut down the business,” he said.
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