Published: 3 November, 2011
Qualcomm's outlook for fiscal 2012 exceeded Wall Street forecasts, indicating continuing buoyancy in the smartphone market, though the chipmaker admitted the figures were lower than its original internal estimates.
The San Diego firm gained sharply in late trading after predicting that its sales for the year ending in September 2012 would be between $18bn and $19bn, ahead of the consensus analyst forecast of $17.3bn. Profit in the fiscal year will range from $3.42 to $3.62 a share, excluding some items, Qualcomm said.
While LTE - in which Qualcomm's IPR position is less commanding than in the CDMA-based technologies - grabs the headlines, the real growth driver for the next few years will still be 3G. Qualcomm said it was benefiting from wider adoption of W-CDMA/HSPA handsets, especially in developing economies, fuelling both chip sales and higher patent royalty revenues. The latter generate the biggest part of the company's profit, setting its business model apart from that of less patent-rich rivals. CEO Paul Jacobs commented in an interview: "It does seem to me that the phone is not a luxury item, it's a staple."
"They are a market share leader in a growing market," Daniel Berenbaum, an analyst at MKM Partners, told Bloomberg. "Anything in wireless that grows is good for Qualcomm. It's a dominant position."
However, Jacobs acknowledged that the predictions were below initial internal forecasts, but the company had scaled these back because of the global economic downturn. "In a time of macroeconomic uncertainty, we've got a lot of different customers and geographies to balance that out," he said.
Qualcomm's Snapdragon chip is driving its growth, especially in the Android smartphone market. However, it is set to lose one segment in which it currently has a monopoly, WP7 handsets. Nokia confirmed this week that it would use ST-Ericsson silicon in a future wave of WP7 devices. For its recently launched Lumia handsets, it used chips from Qualcomm, currently the only firm offering a chipset optimized for the new Microsoft OS. But STE said that the Finnish giant had selected it as a "supplier for future devices it plans to introduce based on the Windows Phone mobile platform". It said this would "enable Nokia to extend Windows Phone devices to new price points and geographies", but gave no further details.
In its recently announced fourth quarter, Qualcomm reported a 39% year-on-year increase in revenue, to $4.12bn, and net income up from $865m the year before to $1.06bn. In the current quarter, the company expects sales of $4.35bn to $4.75bn and a profit of 86 cents to 92 cents per share. Analysts are more cautious, looking for revenue of $4.25bn and profit of 84 cents.