Qualcomm Inc. (QCOM:US), the largest maker of chips for smartphones, forecast fiscal first-quarter sales that may fall short of analysts’ estimates amid a shift to less-expensive handsets that has curbed chip prices.
Sales in the period ending in December will be $6.3 billion to $6.9 billion, the San Diego-based company said yesterday in a statement. That compared with an average analyst estimate of $7.01 billion, according to data compiled by Bloomberg. Profit before certain costs will be $1.10 to $1.20 a share.
Customers have been placing more orders for parts that run in cheaper devices, Chief Operating Officer Steve Mollenkopf said in an interview. A greater portion of business from less-expensive components may hurt Qualcomm’s revenue growth, which has been surging since 2010 amid brisk smartphone demand, said Stacy Rasgon, an analyst at Sanford C. Bernstein & Co.
“They’re seeing a bit of a slowdown in chipsets,” said Rasgon, who has the equivalent of a buy rating on Qualcomm shares. “This wasn’t a bad report, but it’s definitely not good.”
Sales in fiscal 2014 will be $26 billion to $27.5 billion, the company said, compared with an average analyst estimate of $27.5 billion. At the midpoint of that range, revenue growth would be about 8 percent -- a deceleration from annual gains of more than 25 percent for the past three fiscal years (QCOM:US).
The stock fell 3.8 percent to $67.09 at the close in New York. The shares have climbed 8.5 percent this year, compared with a 29 percent gain in the Philadelphia Semiconductor Index.
While demand for more expensive smartphones is still increasing, it’s not keeping pace with that for lower-cost models, Mollenkopf said.
“In the near term, we’re seeing a little bit of a downshift in terms of tier,” he said. “In the second half we continue to see strong units and a little bit stronger mix.”
Net income in the fourth quarter, which ended Sept. 29, rose 18 percent to $1.5 billion, or 86 cents a share, from $1.27 billion, or 73 cents, a year earlier. Revenue climbed 33 percent to $6.48 billion. Analysts on average had estimated earnings of 94 cents a share on revenue of $6.35 billion.
Qualcomm’s yearly sales have more than doubled since 2010. The company gets the majority of its revenue from processors and modem chips used in phones. The bulk of its profit comes from licensing patents that cover many of the fundamentals of modern phone networks.
Chief Executive Officer Paul Jacobs said that profit and revenue will continue to increase at percentages in the double digits for the next five years.
“We’re investing in a bunch of new opportunities and there’s a lot of stuff still coming,” he said in a telephone interview yesterday. “I don’t think we believe that it’s over by any stretch.”
The company is trying to expand outside of phones into tablets and portable computers. It hasn’t yet translated its success in the mobile market into desktop and laptop computing, which is dominated by Intel Corp.’s products.
Qualcomm, Intel and other companies trying to win share in phones and tablets also face the challenge of persuading the two leading mobile-device providers, Apple Inc. and Samsung Electronics Co. (005930), to pass up their in-house components in favor of external suppliers.
Qualcomm provides modems to Apple and supplies both processors and modems to Samsung. Together, the two companies account for more than 40 percent of smartphone shipments and more than half the tablet market.
Jacobs also said the chipmaker looked at some of the assets of struggling smartphone maker BlackBerry Ltd. (BBRY:US), a Qualcomm customer, before it unveiled a turnaround plan when a takeover deal with Fairfax Financial Holdings Ltd. (FFH) collapsed. BlackBerry instead said it would raise $1 billion in convertible bonds.
“There were some assets that we were interested in and we were looking at, but obviously they got a new refinancing,” Jacobs said yesterday.
When asked whether Qualcomm would contribute to attempts to revive BlackBerry, he said, “they have their own strategy. We’re waiting to hear where they are headed.”
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