Despite profits leap, Qualcomm cautious on handsets
Published: 28 January, 2010
READ MORE: Financial | Qualcomm | Semiconductor | Handset
Like Ericsson, Qualcomm seemed to breeze through the worst of the downturn with its results almost unhurt, but is now running into tougher times. Not that Qualcomm's tough times look very difficult to most of its beleaguered rivals, but the firm disappointed Wall Street by lowering revenue guidance for the year, when it reported results for its fiscal first quarter yesterday.
The mobile silicon leader reported sales of $2.67bn for the quarter ended December 27, down 1% on the previous quarter and up 6% year-on-year. Net income was $841m, up 147% year-on-year and 5% sequentially.
For the current quarter, Qualcomm expects revenue to be between $2.4bn and $2.6bn, which would be 2% to 6% up on a year ago. But the company lowered its guidance for the full fiscal year, saying it now expects revenue of between $10.4bn and $11bn. The company had previously predicted a range of $10.5bn to $11.3bn.
The cautious outlook was taken as a worrying sign that recovery in the handset market, Qualcomm's largest, will be slower than hoped for in 2010. Although the sector came out of recession in the middle of 2009, some have been looking for a sharp uptick this year as the world economy recovers. This may take longer than expected, if Qualcomm - a major bellwether for the whole segment - is right.
CEO Paul Jacobs said that the main reason for the downgraded guidance was a "muted" recovery in developed markets. This will push the balance of sales towards the low end, putting pressure on higher margin chipsets. While Qualcomm is forecasting a 21% increase in device shipments in 2010, most of them will be at the low end, entailing lower chip revenues and margins, and lower patent royalties, for the vendor. It expects average sales price of handsets to drop significantly in the current quarter, from $201 to $179 year-on-year, but then to pick up slightly during the rest of the year, peaking around $181.
However, analysts were cheered that Qualcomm did not lower its earnings guidance, and continues to focus heavily on maintaining profitability above all else, as seen by the big year-on-year leap in its Q1 earnings.
The San Diego company projects that it will ship 88m to 92m of its MSM integrated handset chipsets the current quarter, which would be a 28% to 33% increase over the 69m of a year ago.
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