China woes hurt chipmaker Qualcomm's profit forecast

Wed Nov 4, 2015 6:34pm EST
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By Devika Krishna Kumar

(Reuters) - Qualcomm Inc (QCOM.O: Quote) forecast first-quarter profit way below analysts' expectations as the chipmaker struggles against fierce competition from Chinese and Taiwanese rivals, and faces delays in closing new licensing agreements in China.

The company's shares fell nearly 6 percent in extended trading on Wednesday.

Qualcomm's agreements with two major Chinese customers are taking longer than anticipated, Chief Executive Steve Mollenkopf said on a conference call.

President Derek Aberle said some Chinese customers were "improperly withholding" royalties on Qualcomm's patents by changing the way they report sales.

The company, which got half of its fiscal 2014 revenue from Chinese customers, said it expected the issue to be resolved once the new agreements were completed.

Qualcomm is in the middle of a strategic review after hedge fund Jana Partners urged it to separate its chip unit from its highly profitable patent-licensing business.

The company has also announced job cuts and other cost-cutting steps in the face of stiff competition, which is likely to intensify as chipmakers consolidate to meet demand for cheaper semiconductors and to diversify their portfolios.

Qualcomm said on Wednesday that demand for the new version of its flagship Snapdragon mobile chips was stronger than it had expected in the fourth quarter.   Continued...

A Qualcomm sign is pictured in front of one of its many buildings in San Diego, California in this November 5, 2014 file photo.  REUTERS/Mike Blake/Files BUSINESS