Qualcomm profit forecast misses estimates as chip shipments drop

Wed Apr 20, 2016 6:59pm EDT
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(Reuters) - U.S. chipmaker Qualcomm Inc (QCOM.O: Quote) forecast third-quarter profit below analysts estimates as it expects to ship fewer chips, including those for smartphones, its biggest business.

The company's shares dropped 3 percent to $50.50 in after market trading on Wednesday, having earlier oscillated between slight gains and losses.

Qualcomm, whose customers include Apple Inc (AAPL.O: Quote) and Samsung Electronics Co Ltd (005930.KS: Quote), said it expects chip shipments to fall 13-22 percent to 175-195 million in the current quarter.

The company said it expects 3G and 4G device shipments increase to 8 percent at the midpoint in this quarter, lower than its previous estimate of about 10 percent growth.

Besides slowing smartphone sales, Qualcomm is also being squeezed by competitors making chips that rival its own in price and performance, and the likes of Samsung and Apple increasingly making their own components for smartphones.

Qualcomm said it expects to earn between 90 cents and $1.00 per share in the third quarter. Analysts on average were expecting a profit of $1.02 per share, according to Thomson Reuters I/B/E/S.

Research firm Gartner expects global smartphone sales to grow in single digits in percentage terms for the first time ever this year, while Apple in January also forecast its first revenue drop in 13 years.

The uncertainty in the smartphone business seemed to show in the company's third-quarter revenue forecast of $5.2-$6.0 billion, which implies revenue could be between 11 percent lower and 3 percent higher than the year-ago quarter.

However, while Qualcomm's chip business is the bigger contributor to revenue, the San Diego-based company's business of licensing its chip technology is the bigger driver of profit.   Continued...

People walk past Qualcomm's stand during the Mobile World Congress in Barcelona, Spain in this February 24, 2016, file photo. REUTERS/Albert Gea/Files