Qualcomm Gives Weak Forecast on Loss of Apple iPhone Orders

(Bloomberg) -- Qualcomm Inc., the biggest maker of chips used in smartphones, gave a forecast for revenue that missed analysts' average estimate, showing the impact of receiving no orders from Apple Inc. for the latest iPhone models.

The company's earnings and outlook provide a window into demand for products made by some of the world's biggest technology companies such as Samsung Electronics Co. and Huawei Technologies Co. Qualcomm said demand was lower in general but expects that to reverse in the second half of next year as new, fifth-generation or 5G, phone services and networks are deployed.

Resolving a licensing dispute with Apple would help Qualcomm improve its financial performance in the near term.

Key Insights

• First-quarter sales will be $4.5 billion to $5.3 billion, the San Diego-based company said in a statement Wednesday. That compares to the average estimate from analysts of $5.56 billion, according to data compiled by Bloomberg.
• Adjusted earnings per share will be $1.05 to $1.15 a share. Analysts had projected profit of 93 cents.
• Qualcomm's chip business had sales of $4.6 billion in the fiscal fourth quarter. Its licensing unit, which provides the bulk of corporate profit, had sales of $1.14 billion.
• The company had strong demand for its chips in China in the fourth quarter, Chief Executive Officer Steve Mollenkopf said in an interview following the announcement.
• Analysts hadn't included the loss of orders from Apple for the iPhone in their projections for the quarter, according to Chief Financial Officer George Davis, even though the company had warned about it in July.
• Apple's decision not to use Qualcomm chips in the latest iPhones caused a shortfall of about 55 million units compared with the same period a year earlier, Davis said.
• Qualcomm said its fiscal first-quarter guidance “reflects lower Apple legacy shipments and zero share in the current flagship launch, lower demand from our China-based customers, the impact of a one-time estimated tax benefit, increased litigation expenses in our licensing business and lower share count from our share repurchases.”

Market Reaction

• The shares fell 4 percent in extended trading after the results were released. Qualcomm shares were down 1.3 percent this year to $63.21 at the close on Wednesday.

Know More

• Qualcomm is locked in a worldwide legal dispute with Apple. The iPhone maker has stopped using Qualcomm's chips and is refusing to pay licensing fees that add up to billions of dollars of non-payments.
• Qualcomm has said it has been in a dispute with another unnamed licensee that isn't paying patent fees. Analysts have speculated that the company is China's Huawei.
• The company got an interim payment of $100 million in the quarter related to an agreement to deal with the dispute, it said.
• Qualcomm's Mollenkopf said the Apple litigation could still be resolved in a settlement or need to work its way through the courts for full resolution. The company has had periodic talks with Apple, it said.
• For the fiscal fourth quarter the net loss was $500 million, or 35 cents a share. That included the impact of a $2 billion payment to NXP Semiconductors NV after Qualcomm failed to win regulatory approval for the acquisition in China. Revenue fell 1.7 percent to $5.8 billion.
• Profit excluding certain items, was $1.3 billion, or 90 cents a share. That beat the average analyst estimate of 83 cents a share.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Molly Schuetz, Andrew Pollack

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