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Qualcomm Slashes Revenue Forecast by $1B

Iain Morris
4/23/2015

US chipmaker Qualcomm has lowered its full-year revenue forecast by $1 billion after losing business with South Korea's Samsung and amid surging sales of Apple's iPhone devices, which do not use its chips.

The revision came even though the company reported healthy growth in revenues in the first three months of the year -- representing its second quarter -- citing "all-time high" shipments of 3G and 4G devices using its technology.

Sales rose by 8%, to $6.9 billion, compared with the first three months of 2014, with chip shipments rising from 188 million to 233 million over the same period.

Even so, Qualcomm Inc. (Nasdaq: QCOM) had a big setback earlier this year when Samsung Electronics Co. Ltd. (Korea: SEC), a flagship customer, decided to use one of its own processors for the new Galaxy S6 device rather than Qualcomm's latest Snapdragon chip.

In a company statement, CEO Steve Mollenkopf expressed concern that Qualcomm may struggle as Apple Inc. (Nasdaq: AAPL) and Samsung continue to increase their share of the smartphone market.

"While we remain confident in the significant growth opportunities ahead, we are reducing our … outlook for fiscal 2015, primarily due to the increased impact of customer share shifts within the premium tier and a decline in our share at a large customer," he said.

As a result, Qualcomm now expects to make $25 billion to $27 billion in revenues this fiscal year, down from a previous forecast of $26.3 billion to $28 billion.

In its last fiscal year, Qualcomm generated $26.5 billion in revenues.

The company's share price dropped by 2.7% in after-hours trading following the announcement.


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Qualcomm's second-quarter profits also suffered due to one-off charges, with net income dropping 46%, to $1.1 billion, compared with the same period last year.

In February, the chipmaker agreed to pay a $975 million fine to settle an antitrust spat with Chinese authorities. Its operating cash flow in the second quarter was also hit by a payment of $950 million it recently made to secure future business with one of its product suppliers. (See Qualcomm Urged to Spin Off Chips Unit and Qualcomm Looks to Soften China Antitrust Blow .)

Despite reaching an agreement with the country's authorities, Qualcomm remains unhappy about the situation in China, complaining that "certain licensees … are not fully complying with their contractual obligations to report their sales of licensed products to us."

Earlier this month, Qualcomm came under pressure from activist shareholder Jana Partners to spin off its manufacturing business. Jana argued the move would provide a spur to Qualcomm's more valuable patents division.

Mollenkopf says Qualcomm has initiated a "comprehensive review" of its cost structure to identify ways of improving operating margins without losing its technological edge.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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danielcawrey
danielcawrey
4/27/2015 | 12:08:20 PM
Re: MS swoopdown
With all the problems Qualcomm has with Apple, Samsung and China the outlook does not appear to be good. IoT may be a good growth sector for the company, but we're not seeing that scale up as quickly as maybe people thought that it would. 

We'll see. I have confidence Qualcomm will figure it out. 
MordyK
MordyK
4/25/2015 | 3:46:59 AM
Re: MS swoopdown
Lots of things can be said about Qualcomm, but weak isnt one of them.
kq4ym
kq4ym
4/24/2015 | 7:17:20 PM
Re: MS swoopdown
A billion seems like a lot, but it was interesting to see the stock market immediately only went down by a couple of percent even though the loss predicted in revenue was about four percent. It will be interesting to see how Qualcomm fares this year. No bets from me though.
jabailo
jabailo
4/23/2015 | 10:49:42 AM
MS swoopdown
I've read Microsoft is partnering with them for IoT applications.

Maybe they sense a weak player (like they did with Nokia) ripe for the picking.

 
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