Qualcomm shows gains in quarter, but outlook worries

Qualcomm Inc.’s earnings in the fiscal fourth quarter and full year showed year-on-year improvements, but a modest outlook for the fiscal first quarter sent its shares down around 6% in after-hours trading. The stock was down around 3% this morning.
The San Diego-based chip vendor and IP licensor earned revenue of $2.3 billion in the fiscal fourth quarter, with net income of $1.1 billion, up 15% and 84% year-over-year, respectively.
Full-year results were revenue of $8.9 billion and net income of $3.3 billion, up 18% and 34% year-over-year.
The earnings beat analysts’ expectations, but Wall Street always looks to the next quarter. Qualcomm expressed caution on its trajectory, with its earnings estimates for the current fiscal year slightly below analysts’ expectations, thus the dip in stock value.
CEO Paul Jacobs said that his company is “expanding the impact of 3G CDMA beyond traditional products, services and partners.” Yet Qualcomm noted that its dispute with Nokia Corp. over possible royalties from a cross-licensing agreement, which expired in April, led it to exclude any estimated earnings from the handset vendor in its current earnings report and from guidance for the current quarter. The company offered no firm insight into its ongoing legal disputes with Nokia and rival Broadcom Corp. Outstanding legal issues have also dampened the company’s stock value, according to analysts and the company itself.
Analyst Ittai Kidron at CIBC World Markets said in a research note that investors may be disappointed in Qualcomm’s guidance, which he characterized as conservative, after the company’s earlier, upbeat, fiscal fourth quarter projections.
The current, holiday quarter will show strong handset ASPs of $212, but that will drop next quarter after the holidays, as the industry sees more low-cost phones sold in emerging markets, with ASPs declining to $199, according to Qualcomm.
“With management’s cautious track record, we see upside as likely on this front,” Kidron said.