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Qualcomm Falls as Chip-Shipment Forecast Misses Predictions

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July 20 (Bloomberg) -- Qualcomm Inc., the biggest maker of mobile-phone chips, declined in late trading after issuing a forecast for chip shipments in the current quarter that fell short of some analysts’ predictions.

The company will ship 120 million to 125 million chips in the period that ends in September, San Diego-based Qualcomm said in a statement today. That was lower than the 130 million projected by Tero Kuittinen, an analyst at MKM Partners LLC.

Results this quarter will be held back by weakness in Europe, which is grappling with a 21-month sovereign debt crisis. Consumers there are putting off phone purchases, Qualcomm said on a conference call, explaining a shipment outlook that overshadowed forecasts for sales and profit that topped analysts’ projections.

“Chip units for autumn are light,” he said. “The blame likely lies in Europe. European inventory correction now seems to be a fact instead of a theory.”

Qualcomm fell as much as 3.8 percent in late trading, after earlier rising 32 cents to $57.30 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have risen 16 percent this year, a sign of robust demand for mobile phones generally.

Qualcomm gets most of its profit from licensing code division multiple access technology, or CDMA, technology.

“We reduced a bit our forecast for how many new CDMA-based units would sell into Europe,” Qualcomm Chief Financial Officer Bill Keitel said in an interview. “The situation demands that we still be cautious. The consumer in many areas is a little bit stretched.”

Forecasts Top Predictions

Profit excluding certain costs in the current period will be as high as 80 cents a share on sales of $3.86 billion to $4.16 billion, Qualcomm said. That exceeds forecasts for profit of 75 cents and sales of $3.86 billion, the averages in a Bloomberg survey of analysts.

Qualcomm benefits as more consumers ditch traditional mobile devices in favor of smartphones that deliver high-speed Internet access. The company’s radio chips are the most widely used in the mobile phone industry. It also owns some of the technology used in advanced, third-generation wireless services, helping it collect higher licensing revenue as more consumers move to handsets that connect to the Internet.

“Qualcomm’s reach is global and unsurpassed,” said Alex Gauna, a San Francisco-based analyst at JMP Securities. “They are designed into everywhere that matters.”

Snapdragon

Third-quarter net income was $1.04 billion, or 61 cents a share, compared with $767 million, or 47 cents, a year earlier. Revenue was $3.62 billion, up from $2.7 billion. The company was expected to report profit of $1 billion and sales of $3.54 billion.

Apple Inc. began offering the iPhone in February through Verizon Wireless, whose network relies on CDMA. Apple said yesterday it sold 20.3 million iPhones last quarter.

Qualcomm aims to expand the reach of its chips with a microprocessor called Snapdragon. That chip is now running smartphones that use Google Inc.’s Android operating system. Qualcomm is also trying to sell Snapdragon to tablet makers.

Qualcomm said in May that it completed the $3.1 billion acquisition of Atheros Communications Inc., which broadens the company’s lineup of Wi-Fi networking technology. The company said then that the purchase will reduce per-share earnings by 9 cents to 13 cents a share in the remainder of fiscal 2011.

(To listen to a replay of Qualcomm’s conference call, go to {LIVE <GO>}.)

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

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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