Qualcomm Sales Get Boost on Higher China Orders, Royalties

Updated on
  • Fourth-quarter revenue may exceed estimates; shares jump
  • Smartphone-chip sales top company target on Chinese demand

Qualcomm Inc., the biggest maker of chips that run mobile phones, forecast fourth-quarter sales and profit that may exceed analysts’ estimates, helped by higher royalties and a jump in chip orders from Chinese customers. Shares gained as much as 8.2 percent.

Key Points

  • Revenue in the period that ends in September will be $5.4 billion to $6.2 billion, the company said Wednesday in a statement. Profit before certain items will be $1.05 to $1.15 a share.
  • Analysts on average had projected sales of $5.72 billion and profit of $1.08 a share, according to data compiled by Bloomberg.
  • Net income in the third quarter, which ended June 26, rose to $1.4 billion, or 97 cents a share, from $1.18 billion, or 73 cents, a year earlier. Excluding certain items, profit was $1.16 a share, compared with an average estimate of 97 cents.
  • Sales in the recent period increased to $6.04 billion, up 3.6 percent from a year earlier. That makes it the first quarter in a year that the company hasn’t posted a double-digit percentage decline. Analysts on average predicted $5.59 billion.
  • Qualcomm shares climbed as high as $59.78 in extended trading, after closing little changed at $55.23 in regular New York trading.

The Big Picture

The company, which gets the majority of profit from patent licensing, is extending its reach into China, the world’s largest smartphone market, translating into heftier royalty payments. In the chipset business, which provides the company with the biggest slice of its revenue, Chinese handset makers and Samsung have gained share against Apple, helping boost demand for Qualcomm’s processors and modems.

CEO Interview

  • “It was a really strong quarter -- it was strong in both businesses, in particular the license business,” Chief Executive Officer Steve Mollenkopf said by phone. “We got some money a little earlier than we would have thought.”
  • “In China the chipset business has done a good job of growing,” he said. “We’re on track and executing.”

The Detail

  • San Diego-based Qualcomm is suing China’s Meizu Technology Co., trying to force the phone maker to negotiate a license agreement for using the chipmaker’s technology. That’s seen as a test case for the ability of China’s intellectual property courts to enforce such agreements.
  • Qualcomm is facing regulatory scrutiny around the world over its business practices. The company supplies the majority of the components that connect phones to the fastest data networks.