SAN DIEGO-While wireless chip titan Qualcomm Inc. posted strong first quarter results, the company’s stock slipped slightly downward due to warnings of slowing sales in its second quarter.
Qualcomm posted $620 million in net income, or 36 cents per share, for its fiscal fourth quarter, up 21 percent from net income of $513 million, or 30 cents per share a year earlier. Revenue rose 25 percent to $1.74 billion from $1.39 billion a year ago.
“The earnings are pretty good, but people are worried about the company’s guidance,” noted Albert Lin, telecom analyst with American Technology Research. “There’s a big difference between Qualcomm’s and some other companies’ views of how many W-CDMA handsets will be sold in 2006. Companies like Motorola Inc., Texas Instruments Inc. and RF Micro Devices Inc. estimate that 100 million W-CDMA handsets will be sold. But Qualcomm says only 86 million will be sold-that’s a spread of 14 million units.”
Qualcomm said it is sticking with its guidance.
“I’m pretty pleased,” said Bill Davidson, head of Qualcomm’s investor relations. “It’s early in the year and there’s a lot left to unfold. CDMA is more mature than W-CDMA, and predicting the W-CDMA market is not an exact science. I don’t think of our guidance as conservative, I think of it as us being cautious. Our goal is to try and be accurate.”
Wall Street didn’t seem too rattled by the company’s conservative projections. Qualcomm’s stock climbed from $46.75 per share to $47.71 in trading after the news.
“We delivered record first quarter revenue and strong year-over-year growth led by demand for our chips,” said Paul Jacobs, chief executive of Qualcomm. “In emerging markets like China and India, demand for low-end CDMA phones is increasing; in more established markets like the United States, South Korea, Japan and Europe, subscribers continue to migrate and upgrade to feature rich 3G devices and services.
“Looking forward, we expect continued growth of CDMA2000 1xEV-DO products in North America, Japan, South Korea and Latin America. We remain encouraged by the consumer uptake in W-CDMA services in Japan and Europe, and will continue working closely with operators during their ongoing W-CDMA and HSDPA network deployment and optimization efforts.”
In other Qualcomm news, the company announced a license agreement with Yulong Computer Technology Co. Ltd., a subsidiary of China Wireless Technologies. Qualcomm said it granted Yulong a license under its CDMA patent portfolio to develop, manufacture and sell subscriber units implementing any 3G CDMA standard. Though terms of the agreement were not disclosed, Qualcomm described the deal as a multi-million dollar royalty-bearing agreement.
The company announced a similar deal with Chinese handset manufacturer SIM Technology Group. In addition, Qualcomm said it expanded terms of its CDMA licensing agreement with Casio Computer Co. Ltd.
