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QUALCOMM (QCOM)
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Qualcomm : Posts Loss as Revenue Slips -- 2nd Update

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11/07/2018 | 06:36pm EST

By Micah Maidenberg

Qualcomm Inc. swung to a loss in its latest quarter, as sales in the company's unit that develops mobile modem technology were flat and its licensing business continued to be hurt by a continuing fight with Apple Inc.

San Diego-based Qualcomm on Wednesday posted a loss of $493 million, or 35 cents a share, compared with a profit of $168 million, 11 cents a share, in the year-earlier period. Qualcomm also struggled with expenses in the most recent quarter, as total costs rose 16% to $6.46 billion.

On an adjusted basis, Qualcomm reported profit of 90 cents a share, surpassing the 83 cents a share expected by analysts polled by FactSet.

Qualcomm booked $5.8 billion in revenue for the quarter, off 2% from a year earlier. Analysts had expected $5.53 billion.

The company booked $4.65 billion in sales in its segment that creates chip sets used in mobile devices, roughly flat from last year. Earnings before taxes in the business fell 18% to $796 million, according to the company. Qualcomm said mobile modem shipments rose 5%, however.

In its licensing segment, sales fell 6% to $1.14 billion and earnings before taxes dropped 11% to $739 million. Qualcomm didn't record any licensing revenue in the quarter from Apple, which is withholding royalty payments from Qualcomm in a dispute over the company's licensing practices.

Qualcomm has accused Apple of transferring its intellectual property to Intel Corp., which is supplying chips for new-model iPhones.

Meanwhile, earlier this week, a federal judge ruled that Qualcomm must license some of its patents to rival chip suppliers in an antitrust suit brought by the Federal Trade Commission. The ruling has the potential to upend Qualcomm's practice of licensing to device makers rather than chip suppliers, some analysts say.

During a call with analysts Wednesday, Chief Executive Steve Mollenkopf said the FTC "ruling is incorrect." He said the company is focused on settling the case, which goes to trial in January.

"There's nothing in the order that complicates that, and in the meantime, we're not compelled to do anything differently with the business," Mr. Mollenkopf said.

A slowdown in global smartphone sales is compounding Qualcomm's licensing woes. The company expects modem chip shipments to decline 22%, or about 185 million units, during the three months ending in December. The company said that decline partly reflects Apple's release of new iPhones without Qualcomm modem chips.

Shares in Qualcomm were down 4.3% in after-hours trading. The company's stock closed down 0.7% earlier Wednesday.

For the current quarter -- the first in the company's new fiscal year -- Qualcomm forecast revenue between $4.5 billion and $5.3 billion, and per-share earnings between 78 cents and 88 cents. Adjusted earnings are expected to be between $1.05 a share and $1.15 a share, ahead of the consensus forecast from analysts of 94 cents a share.

Qualcomm has faced a series of challenges in its latest fiscal year. Earlier this year, the company fended off a takeover bid by Broadcom Inc., a deal ultimately quashed by President Trump.

In June, Qualcomm nixed its proposed $44 billion acquisition of Dutch chip maker NXP Semiconductors NV after failing to win approval for it from Chinese regulators.

Qualcomm also remains locked in a separate dispute with Chinese smartphone maker Huawei Technologies Co., which is also withholding royalty payments.

Qualcomm said it repurchased 254.6 million shares valued at $21.14 billion in the September period, fulfilling a commitment it made after abandoning its offer for NXP.

--Tripp Mickle contributed to this article.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

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Financials ($)
Sales 2019 20 753 M
EBIT 2019 4 833 M
Net income 2019 3 389 M
Debt 2019 9 841 M
Yield 2019 4,36%
P/E ratio 2019 20,69
P/E ratio 2020 16,84
EV / Sales 2019 3,82x
EV / Sales 2020 3,52x
Capitalization 69 457 M
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Mean consensus OUTPERFORM
Number of Analysts 27
Average target price 68,1 $
Spread / Average Target 19%
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Managers
NameTitle
Steven M. Mollenkopf Chief Executive Officer & Director
Cristiano R. Amon President
Jeffrey William Henderson Non-Executive Chairman
George S. Davis Chief Financial Officer & Executive Vice President
Mary Gendron Chief Information Officer & Senior Vice President
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