Qualcomm Shares Advance After Smartphone Boom Fuels Profit
April 21, 2011, 4:16 PM EDTBy Ian King and Olga Kharif
(Updates to add closing share prices in fifth paragraph.)
April 21 (Bloomberg) -- Qualcomm Inc., the biggest maker of mobile-phone chips, rose as booming smartphone demand fuels better-than-predicted profit and sales.
Excluding some costs, second-quarter earnings rose to 86 cents a share, the San Diego-based company said yesterday. Sales increased 46 percent to $3.88 billion in the period, which ended March 27. Analysts had estimated profit of 80 cents and revenue of $3.62 billion, according to data compiled by Bloomberg.
The shift to smartphones has spurred demand for Qualcomm’s chips and the licensing of its patents, which cover a broad swath of wireless technology. Lower handset prices and the features offered by new network standards, such as long-term evolution, are increasing the appeal of the devices. The company boosted its annual forecast yesterday, citing smartphone growth.
“It’s a nice, solid beat and raise,” said Craig Berger, an analyst with FBR Capital Markets in New York, who has an “outperform” rating on the stock. “Qualcomm does have a tendency to crush their EPS numbers, so estimates are likely to go up.”
Qualcomm gained $1.67, or 3 percent, to $56.94 at 4 p.m. New York time on the Nasdaq Stock Market. The shares have increased 15 percent this year.
Third Quarter
Profit this quarter will be 68 cents to 72 cents a share, excluding some items, with sales of $3.35 billion to $3.65 billion, Qualcomm said. Analysts had projected earnings of 69 cents and revenue of $3.4 billion on average.
For the year, sales will reach as much as $14.7 billion, up from a previous forecast of up to $14.2 billion, Qualcomm said. Earnings will grow to as much as $3.13 a share, compared with an upper end of $3.05 in the prior outlook.
In February, Apple Inc. began offering a version of its iPhone through Verizon Wireless, whose network relies on Qualcomm’s code division multiple access technology, or CDMA. Apple said yesterday that it sold 18.7 million iPhones last quarter, more than double the number in the year-earlier period.
A broader switch to 3G networks and even newer LTE technology is spurring Qualcomm sales, said Executive Vice President Steve Mollenkopf. The company also is optimistic that Nokia Oyj’s agreement to use Microsoft Corp. operating system will generate more orders from the Finnish mobile-phone maker. Qualcomm is a longtime partner of Microsoft.
Getting Orders
“We’ve been very successful on increasing our customer traction with the exception of Nokia,” Mollenkopf said in an interview. “With the Microsoft deal, it’s really made it easier for us to get assignments.”
Second-quarter net income attributable to Qualcomm rose to $999 million, or 59 cents a share, from $774 million, or 46 cents, a year earlier.
While Qualcomm gets the majority of its revenue from chip sales, it receives the bulk of its profit from licensing. The company is trying to expand the reach of its chips with a product called Snapdragon.
That chip is now running smartphones that use Google Inc.’s Android operating system. Qualcomm is also trying to sell it to makers of tablet computers.
Though some customers have been affected by last month’s earthquake and tsunami in Japan, “preliminary indications are that demand has held up fairly well,” Chief Executive Officer Paul Jacobs said during a conference call.
The falling cost of smartphones is letting more consumers upgrade from traditional handsets, generating a wave of growth for the company, said Jacobs, 48.
“The investments that we have made in the past I think are paying off well,” he said.
--Editors: Nick Turner, Jillian Ward
To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Olga Kharif in Portland, Oregon, at okharif@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
