Qualcomm Earnings: What to Watch
July 19 2017 - 8:29AM
Dow Jones News
By Ted Greenwald
Qualcomm Inc. is scheduled to announce results for its fiscal
third quarter after the market closes Wednesday. Here's what to
look for:
EARNINGS FORECAST: For the quarter, which ended in June,
analysts expect Qualcomm to report earnings of 81 cents a share on
an adjusted basis that omits items including stock-based
compensation, according to a survey by Thomson Reuters, down 30%
from $1.16 the same quarter a year earlier.
REVENUE FORECAST: Analysts expect total revenue of $5.3 billion
for the quarter, down nearly 12% from $6.0 billion the same quarter
a year earlier.
WHAT TO WATCH:
APPLE ROYALTIES: Uncertainty over the continuing impact of
Qualcomm's dispute with Apple Inc. threatens to overshadow any
positive results the chip maker may report. The latest quarter was
the first in which Qualcomm received no royalties for the use of
its patents in iPhones and iPads, cutting deeply into its
highest-margin revenue stream. Qualcomm already restated its
forecast for the quarter in April, lopping off more than a fifth of
projected adjusted earnings per share, after Apple indicated that
it no longer would reimburse its contract manufacturers for
royalties owed on devices they build. Analysts will be looking at
how the actual numbers fit with their expectations. "There could be
upward or downward revisions depending on how the Street took out
Apple either correctly or incorrectly," said Mike Walkley of
Canaccord Genuity Group Inc.
iPHONE CHIP SHARE: Apple puts Qualcomm's communications chips in
roughly half of its iPhone 7 phones, the other half of which use
chips from Intel Corp. Anticipation is high for an upcoming,
presumably a premium-priced iPhone celebrating the brand's 10th
anniversary, as well as updates of the earlier version.
Fourth-quarter guidance for chip shipments, which Qualcomm
typically reports with its results, and for smartphone average
selling prices, which may be mentioned in the conference call,
could offer clues on whether Qualcomm will retain its share,
according to Tom Sepenzis of Northland Securities Inc. If
projections for the September quarter exceed the 200 million units
Mr. Sepenzis expects by a few 10s of millions, and if the
smartphone price forecast is substantially above the $204 to $210
Qualcomm reported in March, "that's a good sign" that Qualcomm
chips will have a strong position in the iPhone, he said.
The converse doesn't necessarily hold, though. Some iPhone
watchers anticipate delays in Apple's new phone rollout, and lower
chip shipments and average prices may reflect weakness in the
market for Android phones rather than lack of a place in the new
iPhones.
NXP ACQUISITION: Qualcomm has been consistent in expressing its
expectation that its $39 billion bid to buy NXP Semiconductors NV
will close by the end of the year. Many investors are optimistic
that the deal would bolster Qualcomm by combining its expertise in
digital processing with NXP's in automotive chips, and hedge
against threats to the patent licensing business. U.S. regulators
have approved the tie-up, but European authorities recently
suspended their in-depth inquiry while waiting for Qualcomm to
deliver information they had requested and may start fining the
company $665,000 for every further day of delay. Meanwhile, rumors
have surfaced that some NXP shareholders are pushing to raise the
price. Analysts and investors will be looking for any clues to
Qualcomm's attitude toward both issues.
(END) Dow Jones Newswires
July 19, 2017 08:14 ET (12:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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