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November 03, 2010, 4:39 PM EDT
By Ian King and Olga Kharif
(Adds fourth-quarter results in seventh paragraph.)
Nov. 3 (Bloomberg) -- Qualcomm Inc., the biggest maker of mobile-phone chips, forecast fiscal first-quarter profit and sales that topped analysts’ estimates as demand for smartphones increases. The shares advanced in late trading.
Earnings in the current quarter will be 58 cents to 62 cents a share, the San Diego-based company said today in a statement. That compares with the 52-cent average of projections compiled by Bloomberg. Sales will be $3.05 billion to $3.35 billion, more than the $3 billion average estimate.
Qualcomm, whose chips run the radio functions in phones, is benefitting as consumers buy more handsets that are capable of surfing the Web. The shift to higher-end models also adds to the company’s technology licensing income, which is based on the average price of phones sold.
“We’re finally seeing the smartphone thesis playing out,” said Mike Walkley, an analyst at Cannacord Genuity Ltd. in Minneapolis, who recommends buying the shares and doesn’t own any. “It’s powerful as it starts to play back into Qualcomm’s royalty model.”
Qualcomm rose as much as 10 percent to $50.30 in extended trading, after gaining 31 cents to $45.69 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has lost 1.2 percent this year.
The company gets the bulk of its sales from chips. Even so, the majority of its profit comes from licensing technology called code division multiple access, or CDMA, to makers of phones, phone networks and service providers.
Fourth-Quarter Results
Net income rose 7.7 percent to $865 million, or 53 cents a share, in the three months ended Sept. 26, from $803 million, or 48 cents, a year earlier. Sales rose 9.7 percent to $2.95 billion. Analysts had predicted third-quarter profit of 46 cents a share on revenue of $2.87 billion.
“Exceptional quarter -- well above expectations,” Edward Snyder, managing director at Charter Equity Research in San Francisco, said in an interview. “Next quarter will also be very good. They’ve got a nice run ahead of them.”
Snyder recommends buying Qualcomm shares and says he owns some.
Qualcomm, which suspended sales of its Flo TV devices last month, said today it’s evaluating options for the business. That may include a sale, joint venture, operating it under a new wholesale service or selling the spectrum licenses and discontinuing the network. The company said it would incur charges of $125 million to $175 million in fiscal 2011 to exit the business.
Qualcomm chips were found in 77 percent of 57 phones that run Google Inc.’s Android software, according to consulting firm PRTM. The phones came from 12 manufacturers, PRTM said.
As Android’s market share continues to grow, Qualcomm “is just getting warmed up,” analysts at FBN Securities Equity Research wrote in an Oct. 22 note. Tablet computers with the Android operating system are reaching the market, and Qualcomm, which makes Snapdragon processors that run these devices, is expected to benefit from their sales as well.
Maynard Um, an analyst at UBS AG in New York, increased his 12-month share price target for Qualcomm last week to $49 from $45, citing opportunities with tablet computers.
(Qualcomm will hold a conference call to discuss the results at 4:45 p.m. New York time. Go to {LIVE } or dial +1 (866) 566-8589 and give the pass code 17283098 to listen.)
--Editors: Lisa Wolfson, Nick Turner
To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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(Adds fourth-quarter results in seventh paragraph.)
Nov. 3 (Bloomberg) -- Qualcomm Inc., the biggest maker of mobile-phone chips, forecast fiscal first-quarter profit and sales that topped analysts’ estimates as demand for smartphones increases. The shares advanced in late trading.
Earnings in the current quarter will be 58 cents to 62 cents a share, the San Diego-based company said today in a statement. That compares with the 52-cent average of projections compiled by Bloomberg. Sales will be $3.05 billion to $3.35 billion, more than the $3 billion average estimate.
Qualcomm, whose chips run the radio functions in phones, is benefitting as consumers buy more handsets that are capable of surfing the Web. The shift to higher-end models also adds to the company’s technology licensing income, which is based on the average price of phones sold.
“We’re finally seeing the smartphone thesis playing out,” said Mike Walkley, an analyst at Cannacord Genuity Ltd. in Minneapolis, who recommends buying the shares and doesn’t own any. “It’s powerful as it starts to play back into Qualcomm’s royalty model.”
Qualcomm rose as much as 10 percent to $50.30 in extended trading, after gaining 31 cents to $45.69 at 4 p.m. New York time on the Nasdaq Stock Market. The stock has lost 1.2 percent this year.
The company gets the bulk of its sales from chips. Even so, the majority of its profit comes from licensing technology called code division multiple access, or CDMA, to makers of phones, phone networks and service providers.
Fourth-Quarter Results
Net income rose 7.7 percent to $865 million, or 53 cents a share, in the three months ended Sept. 26, from $803 million, or 48 cents, a year earlier. Sales rose 9.7 percent to $2.95 billion. Analysts had predicted third-quarter profit of 46 cents a share on revenue of $2.87 billion.
“Exceptional quarter -- well above expectations,” Edward Snyder, managing director at Charter Equity Research in San Francisco, said in an interview. “Next quarter will also be very good. They’ve got a nice run ahead of them.”
Snyder recommends buying Qualcomm shares and says he owns some.
Qualcomm, which suspended sales of its Flo TV devices last month, said today it’s evaluating options for the business. That may include a sale, joint venture, operating it under a new wholesale service or selling the spectrum licenses and discontinuing the network. The company said it would incur charges of $125 million to $175 million in fiscal 2011 to exit the business.
Qualcomm chips were found in 77 percent of 57 phones that run Google Inc.’s Android software, according to consulting firm PRTM. The phones came from 12 manufacturers, PRTM said.
As Android’s market share continues to grow, Qualcomm “is just getting warmed up,” analysts at FBN Securities Equity Research wrote in an Oct. 22 note. Tablet computers with the Android operating system are reaching the market, and Qualcomm, which makes Snapdragon processors that run these devices, is expected to benefit from their sales as well.
Maynard Um, an analyst at UBS AG in New York, increased his 12-month share price target for Qualcomm last week to $49 from $45, citing opportunities with tablet computers.
(Qualcomm will hold a conference call to discuss the results at 4:45 p.m. New York time. Go to {LIVE } or dial +1 (866) 566-8589 and give the pass code 17283098 to listen.)
--Editors: Lisa Wolfson, Nick Turner
To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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