Qualcomm shares rise on strong forecast, Huawei agreement
Qualcomm gave a strong sales forecast for the current
quarter, signalling that fifth generation mobile phone services are taking off.
The chip maker also announced a new licensing deal with China’s Huawei
Technologies, sending shares up more than 12 per cent in extended trading.
Revenue excluding certain items will be US$5.5 billion to
US$6.3 billion in the period ending in September, the San Diego-based company
said Wednesday in a statement. Analysts, on average, estimated US$5.77 billion,
according to data compiled by Bloomberg. Including back payments from Huawei,
sales will be US$7.3 billion to US$8.1 billion, the company said. Profit,
excluding some items, will be US$1.05 to US$1.25 cents a share.
The smartphone industry, which has suffered declining unit
shipments since 2016, is pinning its hopes for a rebound on 5G, which will
bring faster data speeds for consumers and add connections and services to
currently stand-alone electronics.
Investors are looking at Qualcomm, whose chips are the main
component in smartphones, for assurances that major markets are ready to build
out 5G networks as the world economy emerges from the coronavirus pandemic.
“The recovery that we’d forecast from Covid in the June
quarter was stronger than we’d expected primarily on the strength of the
developed world and China,” chief executive officer Steve Mollenkopf said in a
telephone interview. “And now we’re heading into the second inflection point
which is more global launches of 5G.”
Shares jumped to a high of US$106.50 in extended trading
after closing at US$93.03 in New York. Qualcomm’s stock had gained 5.4 per cent
this year, trailing a general rally by semiconductor companies.
In the fiscal third quarter, Qualcomm said adjusted revenue
was little changed from a year earlier at US$4.89 billion. Analysts, on
average, projected US$4.8 billion. Net income was US$845 million, or 74 cents a
share. Excluding certain items, profit was 86 cents, compared with Wall
Street’s average estimate of 70 cents.
Qualcomm provides the modems and processors that let
handsets connect to networks and turn the data they receive into the smartphone
features consumers have come to depend on. The company has said it’s the first
to field 5G parts and aims to gain back market share that was eroded as the
previous 4G network technology matured and its customers began to look
elsewhere.
The chip maker has repaired a once-broken relationship with
Apple and will be returning to a role in the iPhone models debuting later this
year. The company, however, has lost share in China as Huawei has focused on
its home market and built devices with its own silicon.
The delay of the launch of one “5G flagship phone” will
cause a “partial impact” on revenue in the current period, Qualcomm said.
Bloomberg has reported that the next iPhone is likely to debut later in the
year than usual.
Qualcomm is unique in the chip industry because it gets the
bulk of its profit from licensing patents that cover the fundamentals of modern
phone systems. The company charges a percentage of the selling price of each
handset, payable by phone makers regardless of whether they use its chips.
The reach of its intellectual property and the profits they
generate has attracted legal and regulatory challenges around the world. Most
have been settled and with the “long-term” agreement reached this month with
Huawei, Qualcomm said it has signed up all major phone makers to license its
patents.
It is still seeking to overturn a sweeping US antitrust
decision against the company.
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