Qualcomm Forecasts Sales That May Top Analysts’ Estimates

Qualcomm Inc. (QCOM), the largest seller of semiconductors for mobile phones, forecast fiscal fourth-quarter sales that may exceed analysts’ estimates, buoyed by smartphone demand in emerging markets.

Sales in the period that ends in September will be $5.9 billion to $6.6 billion, San Diego-based Qualcomm said yesterday in a statement. Net income will be 86 cents to 94 cents a share. Analysts on average had projected revenue of $6.3 billion and earnings of 94 cents, according to data compiled by Bloomberg.

Qualcomm’s forecast may reflect rising orders from Apple Inc. (AAPL) for parts for a new iPhone and demand from smaller customers in developing regions such as China, said Suji De Silva, an analyst at Topeka Capital Markets Inc. The outlook may help ease concerns that growth in the smartphone market is slowing after earnings from customers such as HTC Corp. (2498) and Samsung Electronics Co. missed projections.

“Qualcomm’s got a very strong global position,” said De Silva, who has a hold rating on Qualcomm’s stock. “Apple should be ramping something new and there should be a build for it.”

Analysts project Apple will unveil an updated iPhone later this year.

Qualcomm shares rose 4.1 percent to $63.89 at 9:51 a.m. in New York, and earlier touched $64.45 for the biggest intraday gain since January. The stock was little changed this year through yesterday.

The company owns the most widely used technology standard in phones with Internet access, and its baseband chips are the key component in phones such as Apple’s iPhone and high-end models in Samsung’s Galaxy line.

Average Prices

“Overall it’s a little bit better than expectations,” said Ian Ing, an analyst at Lazard Capital Markets in San Francisco. He has the equivalent of a hold rating on the stock. Qualcomm is being helped by consumers in emerging markets trading up to more expensive and capable phones, lifting average selling prices, he said.

Net income in the third quarter, which ended on June 30, rose 31 percent to $1.58 billion, or 90 cents a share, from $1.2 billion, or 69 cents, a year earlier. Revenue increased 35 percent to $6.24 billion. Analysts on average had predicted earnings of 89 cents a share on sales of $6.05 billion.

Average selling prices were stronger than expected, and sales volumes exceeded projections, Chief Financial Officer George Davis said. Average selling prices of phones in the quarter that ended in March, the basis of licensing revenue booked in the June quarter, were $227 to $233, the company said.

‘Growth Engine’

“There’s still very broad-based demand for smartphones and for chips,” Davis said yesterday in a telephone interview. “You’ve got a tremendous growth engine in the developing markets and you’re still seeing good growth in developed markets.”

While there has been a lull in growth of higher-priced “flagship” phones, that may change when customers bring new models to market ahead of the year-end holiday shopping season, Chief Operating Officer Steve Mollenkopf said. Qualcomm will also benefit as Chinese customers look to expand outside their home market, he said.

For fiscal 2013, Qualcomm said revenue will rise to $24.3 billion to $25 billion, compared with an earlier projection of $24 billion to $25 billion in sales. Average selling prices of devices with Qualcomm’s technology for the year will be $223 to $229, up from an earlier prediction of $216 to $224 and compared with last year’s $216 to $222, Qualcomm said.

Baseband Chips

The majority of Qualcomm’s revenue comes from baseband chips, which connect phones to cellular networks and are sold to wireless-device makers such as Apple and Samsung. Most of the company’s profit comes from the licensing of code division multiple access -- or CDMA -- technology, a radio-communications standard used in handsets and phone systems. Even phones that don’t use its chips generate royalties for Qualcomm if they are compatible with networks that use the CDMA standard.

The company has gained market share in semiconductors by being the first to sell modem chips that support the long-term evolution, or LTE, standard, which provides the fastest speeds for downloading data. Qualcomm has a market share of 86 percent in LTE, according to researcher Forward Concepts.

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

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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