Qualcomm sparkles on smartphone growth

While RIM, Nokia and the others dream of comebacks, Qualcomm shows how one is done. Less than a year ago it was thrown sideways by problems in securing supplies of its newest chips, but now it has bounced back with record results for its fiscal first quarter.

The leading mobile processor vendor upgraded its forecasts for the full year and beat Wall Street expectations, largely because of smartphone growth. While many companies, Qualcomm included, are warning of pressures in the high end handset space, the San Diego firm is responding by seizing more market share from weaker rivals like ST-Ericsson, and pushing its Snapdragon platform beyond phones.

CEO Paul Jacobs boasted of record quarterly revenue, adjusted earnings and chipset shipments, crediting "growing global demand for smartphones", and of course the profit advantage none of its rivals have, the massive pile of IPR. He said in his statement: "Our broad licensing partnerships and extensive chipset roadmap, including our recently announced best-in-class Snapdragon 800 and 600 processors, position us well for strong growth, and we are pleased to be raising our revenue and earnings guidance for fiscal 2013."

For the quarter, Qualcomm reported net income of $1.91bn, or $1.09 a share, up from $1.4bn, or 81 cents, in the year-ago quarter. Excluding items like acquisition-related charges, earnings rose to $1.26 from 97 cents. In November the company had projected adjusted earnings of $1.08 to $1.16 a share. Revenue rose 29% year-on-year to a record $6.02bn, at the high end of guidance. The vendor shipped 182m chipsets during the period, up 17% and above projections of 168m to 178m.

Qualcomm has challenges of its own. At the low end it is facing increasing competition from MediaTek and other Asian suppliers; it has a less powerful grip on mobile patents in LTE than in the CDMA technologies; the two largest smartphone vendors, Apple and Samsung, both use their own processors (though both do buy modems from Qualcomm). However, it is picking off weaker rivals, has largely succeeded in confining Nvidia to the tablet, and has the scale to go after every market opportunity, even the niches - it has a monopoly in Windows Phone devices and powers the new BlackBerry models. It will also be early to provide integrated LTE/processor SoCs and continues to ride high on its expertise in all-in-one mobile chipsets.

While Samsung, Intel and others have warned of the squeezing of smartphone growth and the shift of that growth to low cost models, Qualcomm's executives were in upbeat mode on the earnings call. They said the number of 3G and 4G devices shipped in calendar 2012 was likely higher than it had calculated earlier - it believes the industry shipped 915m to 940m units, up from a previous estimate of 880m to 930m. And though the sector may get tougher in 2013, president Steve Mollenkopf told CNet: "In general, the market is growing like crazy" as the US, in particular, transitions to LTE and emerging economies to 3G. He said Qualcomm's 3G and LTE multimode chip shipments jumped by 90% from the September to the December quarter, saying that growth had been "phenomenal".

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