Qualcomm Q4 disappoints, but Samsung licensing deal does not
Published: 5 November, 2009
READ MORE: Financial | Qualcomm | Samsung | CDMA
As usual, Qualcomm's quarterly results announcement was dominated by licensing issues rather than the figures themselves, but this time the news was positive - the chip giant has extended its license agreement with Samsung, which covers 3G and 4G technologies, with none of the feuding that accompanied its renegotiation with Nokia two years ago.
For the quarter though, the firm disappointed Wall Street, after several quarters when it had defied the recession and come in above guidance. In its fiscal fourth quarter, ended September 27, sales were down 19% year-on-year, and 2% on the previous period, at $2.69bn. Net income was down 9% both year-on-year and sequentially, to $803m. The Q4 figure included a $230m charge levied by the Korean Fair Trade Commission. Excluding charges, net income was $811m,down 23% on a year ago. Pro forma earnings equated to 48 cents per diluted share. The consensus of analyst forecasts had looked for revenue of $2.72bn and pro forma diluted earnings of 52 cents per share.
For the full fiscal year, total sales were down 7% on 2008 at $10.39bn, while net income was down significantly, sliding by 42% to $2.19bn. These results included a $783m charge related to an $891m settlement and licensing deal with Broadcom.
The Samsung agreement lasts for 15 years and will involve an upfront payment of $1.3bn plus unspecified recurring royalty payments. It majors on CDMA-based technologies but is also likely to include other areas where Qualcomm holds patents. The US firm also gets a license to 57 Samsung patents related to mobile communications, though there is no payment to the Korean firm, whose IPR is worth less than Qualcomm's in this deal. Samsung is particularly strong in IPR related to OFDM and displays.
Qualcomm expects revenue for the current quarter to be between $2.55bn and $2.75bn, which would be an increase of 2%-10% on the year-ago period. This guidance once again fell below consensus analyst expectations of $2.84bn.
Despite disappointment in the last quarter, most analysts remain upbeat that Qualcomm will be the chipmaker best positioned to reap the rewards of the upturn in handset shipments in 2010, and of the move to new technologies like HSPA+ and eventually LTE.
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