Qualcomm CFO Overhauls Revenue Metrics as Business Shifts
November 18 2020 - 9:59AM
Dow Jones News
By Nina Trentmann
Qualcomm Inc. finance chief Akash Palkhiwala overhauled some of
the chip giant's revenue disclosures in the latest quarter, a move
intended to reveal changes in the company's business strategy to
investors.
The San Diego-based company, which develops mobile technologies,
for the first time broke out sales generated by its handsets and
automotive businesses. It also provided figures for revenues from
the Internet of Things segment, referring to connected devices, and
the radio frequency front-end segment, which makes device panels
for certain circuits.
"It is meaningful to make a change like this when your business
is evolving," Mr. Palkhiwala said. "This will allow all of our
investors to track progress outside of mobile phones," he said.
Revenues by the four segments were nearly $5 billion in the
quarter ended Sept. 27, with over $3 billion coming from handsets
and more than $900 million coming from the Internet of Things
business. Qualcomm booked total revenue of $8.34 billion during the
period.
The change comes as Qualcomm's business is shifting more toward
providing chips for other internet-enabled and connected devices in
addition to smartphones. The creation of the new revenue metrics
suggests the company is confident about the growth opportunities
for these businesses, said Patrick Moorhead, principal analyst at
Moor Insights & Strategy, a research and consulting firm.
"Breaking this out provides the industry with much more
transparency on where growth is coming from," said Daniel Newman,
principal analyst at Futurum Research, a boutique research firm.
"The Street is looking for more clarity as these businesses
diversify."
Other technology companies also are providing such granular
insights, or are planning to do so.
Alphabet Inc. from next quarter onward will break out its cloud
business as a separate reporting segment, Chief Executive Sundar
Pichai said during the company's most recent earnings call. "With
this segmentation, you will additionally see information about the
scale of our investments, which should help you gauge the progress
we are making on the multiyear path ahead to create sustainable
value," Mr. Pichai said.
While more information is usually welcomed by investors,
accounting experts suggest taking a closer look at the new
metrics.
"We suggest investors proceed with caution when companies
provide this type of information, and ask themselves if it truly
provides a clearer view of the business," said David Zion, head of
accounting and tax research firm Zion Research Group.
Investors also should ask whether the new breakouts are
comparable with similar metrics from other companies, Mr. Zion
said.
When additional metrics are introduced, companies are forced to
keep providing them, even when those new businesses aren't doing so
well, Mr. Moorhead said. "Breaking it out, there is a mandatory
requirement for you to talk about it," he said.
Qualcomm conducts an annual evaluation of its metrics to
determine whether they are still reflective of the company's
business, Mr. Palkhiwala said.
"Consistency is important when you set metrics," he said.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
November 18, 2020 09:44 ET (14:44 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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