UPDATE 3-Qualcomm quarterly revenue beats Street; stock up

Wed Jul 24, 2013 7:34pm EDT

(Adds comment from CEO, rewrites first paragraph)

By Noel Randewich

SAN FRANCISCO, July 24 (Reuters) - Qualcomm Inc posted third-quarter revenue that beat expectations and earnings that matched them to ease concerns about slower growth of smartphone sales and help push the leading mobile chipmaker's shares up more than 4 percent.

Few semiconductor companies have benefited more from the mobile revolution than Qualcomm, but the supplier of chips for Apple Inc's iPhones and Android devices has begun to face pressure as growth in smartphone sales shifts to Asia.

In its fiscal third-quarter report on Wednesday, Qualcomm met analysts' expectations for earnings and was ahead on revenue.

"It looks like momentum is continuing. It doesn't feel like the smartphone story is over," Bernstein analyst Stacy Rasgon said.

In Apple's quarterly report on Tuesday, the Cupertino, California, company said it sold more iPhones than Wall Street had expected. Samsung Electronics Co, which overtook Apple to become the world's largest smartphone maker in 2012, had fueled concerns about smartphone sales when it issued a disappointing earnings forecast earlier this month.

"There seems to be some concern that developed regions are becoming saturated with smartphones," Qualcomm CEO Paul Jacobs said on a conference call with analysts.

He went on to say that over the long-term, Qualcomm expects only a modest decrease in smartphone replacement rates in developed countries thanks to incentives offered by carriers to their subscribers.

Qualcomm said average selling prices for phones were rising in developed countries and in emerging markets.

Network operators worldwide are shifting to a high-speed wireless technology known as long-term evolution (LTE) that Qualcomm is a leader in, helping the company grow much faster than Intel Corp and other suppliers of chips for personal computers.

But Qualcomm faces competition from small Asian mobile chipmakers as well as dominant PC chipmaker Intel, whose mobile push is showing promising signs after failing to attract device makers in recent years.

Shares of Qualcomm are about flat year to date and trade at about 13 times expected earnings. Intel's stock has risen about 10 percent in 2013 and now trades at about 12 times earnings.

"We watch those who we consider our competitors very closely," said Qualcomm Senior Vice President Bill Davidson. "Intel hasn't seen great success in terms of market traction yet but we clearly watch them just based on their capabilities."

Google said on Wednesday it is using a Qualcomm Snapdragon processor in the newest version of its high-profile Nexus 7 tablet.

Qualcomm posted fiscal third-quarter revenue of $6.24 billion and net income of $1.58 billion, or 90 cents a share, boosted by growing demand for smartphones in Asia.

It said revenue in the current quarter, which ends in September, would range from $5.9 billion to $6.6 billion.

Analysts on average had expected third-quarter revenue of $6.055 billion and fourth-quarter revenue of $6.293 billion, according to Thomson Reuters I/B/E/S.

"This is better than the Street had been girding for, given what's been going in the smartphone markets," said Williams Financial analyst Cody Acree.

For the fiscal third quarter, non-GAAP earnings per share were $1.03, in line with expectations.

Qualcomm estimated fiscal 2013 non-GAAP earnings of $4.48 to $4.56 per share. Its previous forecast was $4.40 to $4.55.

Shares of Qualcomm rose 4.33 percent in extended trade after closing down 1.46 percent at $61.39 on Nasdaq. (Reporting by Noel Randewich; Editing by Richard Chang and Bob Burgdorfer)

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