By Noel Randewich
SAN FRANCISCO Nov 6 Qualcomm Inc on
Wednesday forecast revenue below expectations and said it would
curb fast-growing operating expenses, stoking concerns the
leading mobile chipmaker faces tough competition in Asia, and
sending its stock down.
San Diego-based Qualcomm's components are used in smartphones
made by Apple Inc and Samsung Electronics Co Inc
and its patents pulling in revenue from licensees
across the cellphone industry.
But with growth in the smartphone industry shifting away
from wealthy markets such as the United States and toward
emerging economies such as China, analysts have been concerned
that less expensive phones could impact Qualcomm's
Qualcomm posted double-digit growth in the fiscal fourth
quarter for the 13th consecutive time, but its revenue forecast
suggests the company's explosive growth in recent years might be
slowing as smaller competitors challenge it in Asia.
"We know you can't get the same royalty revenue off of a
sub-$200 phone that you get off an iPhone or the Galaxy line,"
said Williams Financial analyst Cody Acree. "We're seeing
evidence that the emerging-market impact is having pressure on
revenue and earnings trends and it's forcing the company to
react and cut its spending."
Qualcomm said it operating expenses in fiscal 2014 would
grow between 5 percent and 7 percent, much less than the 20
percent annual growth seen in the past three years.
For fiscal 2014, Qualcomm expects the average selling prices
of phones using its CDMA technology to be between $216 and $230,
down about 1 percent from 2013.
Average prices for cellphones in the June quarter, used to
calculate licensing revenue for Qualcomm in the September
quarter, were between $227 and $233, the company said.
Qualcomm expects the second half of 2014 to be better than
the first because of the anticipated launch in China of a
high-speed wireless technology known as long-term evolution
(LTE), an advanced cellphone standard in which Qualcomm is a
"With the upcoming launch of LTE, we expect increased demand
for smartphones across many tiers of devices. It's not just
about smartphones," Chief Executive Officer Paul Jacobs told
analysts on a conference call.
While the majority of Qualcomm's revenue comes from selling
baseband chips that let phones communicate with carrier
networks, most of its profit comes from licensing patents for
its ubiquitous CDMA cellphone technology. As phone prices edge
lower, Qualcomm receives less revenue.
Network operators worldwide are shifting to LTE, but other
chipmakers are launching their own LTE chips and stepping up
Qualcomm shares are up about 7 percent year to date and
trade at about 14 times expected earnings. Taiwan's MediaTek Inc
, a major player in low-end smartphones sold in Asia,
has seen its shares jump over 30 percent in 2013 and they trade
at 18 times expected earnings.
Qualcomm said in its report on Wednesday that fiscal 2014
revenue would range from $27.5 billion to $26 billion, on the
low end of analysts expectations of $27.5 billion.
The chipmaker posted fiscal fourth-quarter revenue of $6.48
billion, up 33 percent from the year-ago quarter.
It had net income of $1.50 billion, up 18 percent.
GAAP diluted earnings per share were 86 cents. Is non-GAAP
earnings per share were $1.05.
It said revenue in the fiscal first quarter, which ends in
December, would range from $6.3 billion to $6.9 billion.
Analysts on average had expected fourth-quarter revenue of
$6.346 billion and first-quarter revenue of $6.989 billion,
according to Thomson Reuters I/B/E/S.
Qualcomm shares were down 4 percent in extended trading
after closing up 1.06 percent at $69.74 on Nasdaq.