Qualcomm's Apple Problem
Mark Hibben • 24 Comments
Mark Hibben • 24 Comments
Tue, Apr. 26, 5:19 PM
- Apple (down 7.8% after hours) missed FQ2 estimates and guided for FQ3 revenue of $41B-$43B, below a $47.32B consensus. iPhone unit shipments fell 16% Y/Y to 51.2M, and iPad shipments 19% to 10.3M. Both figures were a little better than expectations. However, guidance points to another large Y/Y iPhone decline in FQ3.
- Cirrus Logic (down 4.2%) beat FQ4 estimates, but guided for FQ1 revenue of $220M-$250M, below a $257.5M consensus. Apple accounted for 62% of FQ4 revenue, and another customer (believed to be Samsung) 17%.
- Skyworks (NASDAQ:SWKS) is down 5.2% after hours. Qorvo (NASDAQ:QRVO) is down 5%. Broadcom (NASDAQ:AVGO) is down 3.8%. Qualcomm (NASDAQ:QCOM) is down 2.4%. NXP (NASDAQ:NXPI), which rallied earlier today thanks to a Q1 beat and solid Q2 guidance is down 2.5%. Nasdaq futures are down 0.9%.
Wed, Apr. 20, 4:43 PM
- In tandem with its FQ2 report, Qualcomm (NASDAQ:QCOM) has announced the settlement of its royalty arbitration dispute with LG. Terms of the settlement, which was first disclosed in January on the FQ1 earnings call, remain unknown.
- The company has also announced a 3G/4G patent licensing deal with Chinese OEM Hisense. Deals with Xiaomi, Lenovo, and a slew of other Chinese OEMs have been announced in recent months.
- MSM shipments: FQ2 MSM chip shipments totaled 189M, down 19% Y/Y but towards the high end of a 175M-195M guidance range - Snapdragon 820 shipments for Samsung's Galaxy S7 helped out. FQ3 guidance is also at 175M-195M (-13%-22% Y/Y).
- Device sales: Reported 3G/4G device sales (based on FQ1 licensee shipments) fell 8% Y/Y to $70.1B. Shipments fell 13% to 335M-339M, while ASP rose 6% to $205-$211.
FQ3 reported device sales (based on FQ2 shipments) are expected to be down 1%-14% Y/Y to $52B-$60B. Meanwhile, Qualcomm has lowered its 2016 3G/4G device shipment forecast to 1.625B-1.725B (+5%-11% Y/Y) from 1.67B-1.77B.
- Financials: FQ2 chip division (QCT) revenue fell 19% Y/Y to $3.34B; segment op. profit fell to $170M from $750M. Licensing division (QTL) revenue fell 12% to $2.14B; op. profit fell to $1.86B from $2.16B.
Boosting EPS: $1.55B was spent to buy back 31.7M shares. $2.05B was spent on buybacks in FQ1. Qualcomm ended FQ2 with $30B in cash ($27.1B offshore) and $11.9B in debt.
- QCOM now +0.5% after hours to $52.35. A lot has been priced in over the last two years.
- Qualcomm's results/guidance, earnings release (.pdf), slides (.pdf)
- Now read Qualcomm Earnings: Opportunity On Any Drop
- Update (6:18PM ET): Qualcomm has turned negative again: Shares are now down 2.7% after hours.
Wed, Apr. 20, 4:06 PM
- Qualcomm (NASDAQ:QCOM): FQ2 EPS of $1.04 beats by $0.08.
- Revenue of $5.54B (-20% Y/Y) beats by $200M.
- Expects FQ3 revenue of $5.2B-$6B (-11% to +3% Y/Y) and EPS of $0.90-$1.00 (-9% to +1%) vs. a consensus of $5.56B and $1.02.
- Shares -3.1% after hours.
- Press Release (.pdf)
- Update: Along with its results, Qualcomm announces it has settled its arbitration dispute with LG (terms are undisclosed), and that it has struck a 3G/4G patent licensing deal with Chinese OEM Hisense (follows deals with many other Chinese firms).
- Update 2 (4:45PM ET): Qualcomm is now up 0.5% after hours. Details on the company's FQ2 results can be found here.
- Update 3 (6:57PM ET): Shares have reversed course again: They're now down 2.6% after hours.
Tue, Apr. 19, 5:35 PM| Tue, Apr. 19, 5:35 PM | 15 Comments
Thu, Jan. 28, 10:37 AM
- Initially up yesterday after posting an FQ1 beat and issuing soft FQ2 guidance - expectations were fairly low following warnings from fellow iPhone suppliers and Apple's light guidance - Qualcomm (NASDAQ:QCOM) has tumbled to new multi-year lows today.
- Aside from the guidance, Qualcomm could be pressured by an earnings call disclosure (transcript) that LG contends its royalty payments are excessive, and has taken its claim to arbitration. Qualcomm deferred over $100M worth of licensing revenue in FQ1 due to the dispute, which comes amid a probe by Korean regulators regarding Qualcomm's IP licensing practices.
MSM shipments/device sales: Weak chip sales (including, presumably, to Apple) are set to weigh on FQ2 results: After totaling 242M in seasonally strong FQ1 (-10% Y/Y, but near the high end of a 225M-245M guidance range), MSM chip shipments are expected to drop 16-25% Y/Y in FQ2 to 175M-195M. "Improving trends" are expected for chip sales in the second half of FY16.
Reported device sales (on which royalties are collected) are expected to be down 4%-14% to $65B-$73B, after rising 7% in FQ1 to $60.6B (above guidance of $50B-$58B, thanks in part to Chinese licensing deals). Estimated 3G/4G device ASP (affects royalties) was $193-$199 in FQ1 vs. $207--$213 in FQ4 and $194-$200 a year ago. For calendar 2016, Qualcomm still sees total 3G/4G device sales rising 7%-13% to 1.67B-1.77B.
Financials: FQ1 chip division (QCT) revenue -22% Y/Y to $4.1B; op. profit -49% to $590M. Licensing division (QTL) revenue -12% to $1.61B (the LG dispute weighed); op. profit -15% to $1.34B. Thanks to job cuts, GAAP R&D spend was flat Y/Y at $1.35B, and SG&A spend down 1% to $578M.
Lifting EPS: $2.05B was spent to buy back 36.6M shares. Qualcomm ended FQ1 with $30.6B in cash ($27.9B offshore) and $11B in debt.
- William Blair has downgraded to Market Perform, and Topeka Capital has cut its target by $2 to $50. FBR's Chris Rolland (Market Perform) is worried about the LG dispute, a perceived slowdown in mobile innovation that has allowed OEMs to increasingly use their own app processors and baseband modems, and lower royalty rates for 4G-only devices relative to multi-mode (3G/4G) devices.
- Qualcomm's results/guidance, earnings release, slides (.pdf)
Wed, Jan. 27, 4:10 PM
- Qualcomm (NASDAQ:QCOM): FQ1 EPS of $0.97 beats by $0.07.
- Revenue of $5.77B (-18.7% Y/Y) beats by $80M.
- Expects FQ2 revenue of $4.9B-$5.7B (-17%-29% Y/Y) and EPS of $0.90-$1.00 vs. a consensus of $5.69B and $1.02.
- Shares +1% after hours.
Tue, Jan. 26, 5:35 PM| Tue, Jan. 26, 5:35 PM | 26 Comments
Nov. 4, 2015, 6:29 PM
- Qualcomm (NASDAQ:QCOM) has fallen to $56.75 after hours after providing soft FQ1 EPS guidance (and in-line revenue guidance) to go with an FQ4 beat. At the midpoints, the guidance implies 21% Y/Y revenue and EPS declines.
- The company notes stronger-than-expected MSM chip shipments offset slower-than-expected progress in striking new Chinese licensing deals in FQ1 (a deal with ZTE was recently announced). A revenue mix shift towards chips from (higher-margin) royalties pressures EPS. Though not providing full FY16 revenue guidance, Qualcomm is guiding for QTL (licensing division) revenue of $7.3B-$8B vs. an FY15 level of $7.9B.
- Key metrics: FQ4 MSM shipments totaled 203M, -14% Y/Y but above guidance of 170M-190M. FQ1 shipments are expected to total 225M-245M (-9%-17% Y/Y). Reported 3G/4G device sales (from which royalties are collected) rose 2% Y/Y in FQ4 to $58.3B. They're expected to total $50B-$58B (-11% to +3% Y/Y) in FQ1. Estimated 3G/4G device ASP fell to $207-$213 from $220-$226 a year ago. Global 3G/4G device shipments are expected to rise 11%-17% in 2015 to 1.52-1.6B, and 7%-13% in 2016 to 1.67B-1.77B.
- Business performance: QCT (chip division) revenue fell 25% Y/Y in FQ4 to $3.6B (hurt by iPhone share gains and Samsung's use of Exynos processors in the Galaxy S6/Note 5); segment op. profit fell 73% to $280M. QTL revenue fell 1% to $1.8B; op. profit fell 3% to $1.5B. GAAP R&D spend fell slightly Y/Y to $1.36B; SG&A rose 9% to $595M.
- Financials/restructuring: $2.2B was spent to buy back 37.5M shares, and another $1.4B has been spent on buybacks thus far in FQ1. Qualcomm ended FQ4 with $30.9B in cash ($25.6B offshore), and $11B in debt. Thanks to job cuts, the company expects non-GAAP SG&A/R&D spend to drop 6%-8% in FY16. Qualcomm aims to lower its spending run rate by $1.1B/year by the end of FY16, and to cut annual stock compensation by $300M.
- FQ4 results/FQ1 guidance, PR, slides (.pdf)
Nov. 4, 2015, 4:08 PM
- Qualcomm (NASDAQ:QCOM): FQ4 EPS of $0.91 beats by $0.05.
- Revenue of $5.45B (-18.5% Y/Y) beats by $240M.
- Expects FQ1 revenue of $5.2B-$6B and EPS of $0.80-$0.90 vs. a consensus of $5.79B and $1.08.
- Annual revenue/EPS guidance will no longer be provided.
- Shares -1.3% after hours.
Nov. 3, 2015, 5:35 PM
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Sep. 2, 2015, 1:33 PM
- After aggressively hiking their Ambarella (AMBA -12.9%) targets as shares soared well above $100 earlier this year, several firms have cut them following yesterday's FQ2 beat and in-line FQ3 guidance. However, no downgrades have arrived.
- "An in-line guide disappointed, as the typical beat and raise failed to play out this quarter," notes Ascendiant's David Williams. In addition to GoPro-related concerns, he thinks China fears are weighing on shares, but adds he believes Ambarella's Chinese exposure (includes security and auto cameras, as well as Xiaomi's Yi action camera) isn't huge.
- Pac Crest's Brad Erickson (Overweight rating, $123 target): "Timing and product mix affected AMBA's guidance, but we believe it remains sole-sourced at GoPro while the rest of the business is growing over 60% y/y ... China IP security paused in the quarter due to macro concerns and the company still beat revenue estimates, which highlights how diversified the business has become,"
- Canaccord's Matt Ramsay (Buy, target cut by $17 to $105): "[W]e maintain our belief Ambarella’s portfolio of highly differentiated application-specific video encode, compression, and analytics processors will maintain strong market share against SoC competition and positions the company for strong sales and earnings growth..." Morgan Stanley's Joseph Moore (Equal-Weight) dismisses fears of competition from Qualcomm (NASDAQ:QCOM), arguing a Qualcomm video SoC based on its mobile processors would be more expensive, more power-hungry, and consume more DRAM than Ambarella's SoCs.
- Regarding GoPro (GPRO -7.3%), Raymond James' Tavis McCourt (Outperform, target cut by $21 to $50) thinks Ambarella's guidance suggests there won't be a holiday season camera refresh, and that the Hero4 Session "was the company’s biggest product launch of the year." McCourt also notes Ambarella's sales to GoPro contract manufacturer Chicony have risen over 100% Y/Y (easily topping GoPro's shipment/revenue growth), and thinks this is a sign GoPro was stockpiling inventories the last 3 quarters.
- JMP's Alex Gauna (Outperform rating, $105 target on GoPro) has cut his GoPro Q3 estimates due to Ambarella's guidance. But he adds retail/online checks are in-line with seasonality, and show little evidence of competitive pressure. "[W]e would be buyers of GPRO on any potential weakness in sympathy with AMBA."
- Prior Ambarella coverage
Jul. 22, 2015, 4:51 PM
- Qualcomm's (NASDAQ:QCOM) strategic realignment plan aims to reduce annual spending by $1.4B. In addition to cutting 15% of its workforce, the company plans to lower costs by reducing annual stock compensation grants by $300M.
- Confirming a recent WSJ report, Qualcomm adds it plans a review of its corporate/financial structure that includes "possible business separation alternatives" - presumably a reference to a potential split of QCT (chips) from QTL (licensing). Further capital returns and "other potential strategic and financial alternatives" will also be weighed. The review is expected to be finished by year's end.
- As part of a deal with activist Jana Partners, Qualcomm has added two Jana-backed directors, Mark McLaughlin and Tony Vinciquerra, and plans to add another independent director. Donald Cruickshank won't stand for board re-election at the 2016 annual meeting; Raymond Dittamore won't stand at the 2017 meeting.
- Qualcomm, which has a history of making big investments in non-core ventures (FLO TV, Globalstar, etc.), also says it's "reducing its investments outside of QTL and QCT and will focus these investments around the highest-return opportunities, including data centers, small cells and certain IoE verticals."
- Guidance: Discussing its light FQ4 guidance (revenue is expected to be down 25%-40% Y/Y), Qualcomm notes chip sales continue to be impacted by "increased concentration in the premium tier" - a reference to iPhone share gains - as well as lower high-end chip sales from "a vertical customer" (presumably Samsung) and lower Chinese sell-through of certain phones containing high-end chips.
- In addition, royalty revenue continues to be impacted by Chinese under-reporting (in spite of the February settlement). Qualcomm thinks "it will take time" to finish negotiations with certain Chinese OEMs. The company's FY15 (ends in September) forecast for reported 3G/4G device sales has been cut to $253B-$259B from $255B-$275B.
- MSM shipments: 225M MSM chips were shipped in FQ3, flat Y/Y and towards the high end of a 210M-230M guidance range. However, shipments are expected to fall to 170M-190M (-19%-28% Y/Y) in FQ4.
- Key numbers: QCT revenue fell 22% Y/Y in FQ3 to $3.85B; op. profit fell 74% to $289M. QTL revenue rose 7% to $1.93B; op. profit rose 7% to $1.65B. $5.4B was spent to buy back 63.7M shares. Qualcomm ended FQ3 with $35.2B in cash/investments, and $10.9B in debt.
- After initially rising, shares have fallen to $62.75 AH.
- FQ3 results/FQ4 guidance, PR
Jul. 22, 2015, 4:07 PM
- Qualcomm (NASDAQ:QCOM): FQ3 EPS of $0.99 beats by $0.04.
- Revenue of $5.83B (-14.4% Y/Y) misses by $20M.
- Expects FQ4 revenue of $4.7B-$5.7B and EPS of $0.75-$0.95, below a consensus of $6.13B and $1.08.
- Cutting 15% of workforce via strategic realignment plan.
- Shares +1.9% AH.
- Update: Qualcomm finished AH trading down 1.3%.
Jul. 21, 2015, 5:35 PM| Jul. 21, 2015, 5:35 PM | 5 Comments
Apr. 22, 2015, 6:37 PM
- Echoing its January remarks, Qualcomm (NASDAQ:QCOM) states it's cutting its chip division (QCT) outlook for the second half of FY15 due to "customer share shifts within the premium tier" that will lead to a mix shift towards baseband modems relative to Snapdragon baseband/app processors (a reference to Apple's share gains), and "a decline in our share at a large customer" (a reference to Samsung and its Galaxy S6 choices).
- The company also says that while it settled with Chinese regulators in February, it thinks some Chinese licensees still aren't fully reporting device sales, and believes "it will take some time for licensees to decide whether to accept the new China terms or retain the terms of their existing agreements."
- Thus, while Qualcomm expects 1.52B-1.6B 2015 3G/4G device sales (up from 2014's 1.37B), it's not providing guidance for 2015 reported sales. Guidance for FY15 reported device sales has been slightly hiked to $255B-$270B (+5%-13% Y/Y) from $245B-$270B.
- The company has "initiated a comprehensive review of our cost structure to identify opportunities to improve operating margins." Jana Partners is likely pleased. FQ3 guidance implies a 9%-21% Y/Y sales drop, and revised FY15 guidance a range of -6% to +2%.
- QCT revenue rose 5% Y/Y in FQ2 to $4.43B; op. profit rose 1% to $750M. IP licensing division (QTL) revenue rose 17% to $2.41B (calendar Q4 iPhone 6 sales provided a lift); op. profit rose 18% to $2.16B. R&D spend rose just 2% to $1.19B; SG&A spend fell 1% to $447M.
- $1.9B was spent on buybacks in FQ2, and another $541M has been spent since. Qualcomm has promised to spend $10B on buybacks from March 2015-2016, on top of a promise to return at least 75% of free cash flow to shareholders.
- QCOM -2.7% AH to $67.08.
- FQ2 results/guidance, PR, earnings slides (.pdf)
QUALCOMM, Inc. engages in the development, design, manufacture, and marketing of digital telecommunications products and services. It operates through three segments: Qualcomm CDMA Technologies, Qualcomm Technology Licensing, and Qualcomm Strategic Initiatives. The Qualcomm CDMA Technologies... More
Industry: Communication Equipment
Country: United States
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