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Qualcomm Inc. (QCOM)

- NASDAQ
  • Wed, Jul. 22, 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
    | Wed, Jul. 22, 4:51 PM | 1 Comment
  • Wed, Jul. 22, 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.
    • Press Release
    • Update: Qualcomm finished AH trading down 1.3%.
    | Wed, Jul. 22, 4:07 PM | 24 Comments
  • Tue, Jul. 21, 5:35 PM
  • Wed, Apr. 22, 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)
    | Wed, Apr. 22, 6:37 PM | Comment!
  • Wed, Apr. 22, 4:07 PM
    • Qualcomm (NASDAQ:QCOM): FQ2 EPS of $1.40 beats by $0.07.
    • Revenue of $6.89B (+8.2% Y/Y) beats by $60M.
    • Expects FQ3 revenue of $5.4B-$6.2B and EPS of $0.85-$1.00, below a consensus of $6.5B and $1.14.
    • Expects FY15 (ends Sep. '15) revenue of $25B-$27B and EPS of $4.60-$5.00 vs. a consensus of $27.22B and $5.00.
    • 233M FQ2 MSM chip shipments, in-line with guidance of 220M-240M. 210M-230M shipments expected in FQ3.
    • Shares -1.1% AH.
    • Press Release
    | Wed, Apr. 22, 4:07 PM | 2 Comments
  • Tue, Apr. 21, 5:35 PM
  • Mon, Feb. 9, 4:22 PM
    • Qualcomm (NASDAQ:QCOM) will pay RMB6.088B ($975M) to settle the Chinese government's antitrust probe, just a little less than the $1B reported by Reuters.
    • However, the company will get to charge a 5% royalty rate on 3G-capable devices (including multi-mode 3G/4G hardware, which account for a large % of Chinese 4G phones sold today) for access to "3G and 4G essential Chinese patents," 4G devices that don't support 3G CDMA or WCDMA networks will carry a 3.5% rate. However, the royalty is derived from a base of 65% of the device's net selling price.
    • Some fine print: Qualcomm will license its "essential Chinese patents" separately from other patents - that could mean 3G TD-SCDMA patents aren't covered - and negotiate cross-licenses in "good faith." It also won't "condition the sale of baseband chips on the chip customer signing a license agreement with terms that the NDRC found to be unreasonable or on the chip customer not challenging unreasonable terms in its license agreement." However, Qualcomm isn't obligated to sell chips to a non-licensee.
    • The company has also agreed to create "a China-specific investment fund of $150 million to further the development of mobile and semiconductor technologies." It already committed $40M to similar investments in December.
    • FY15 (ends Sep. '15) guidance has been hiked on the low end: Revenue guidance is now at $26.3B-$28B vs. $26B-$28B, and EPS guidance at $4.85-$5.05 vs. $4.75-$5.05.
    • QCOM +2.2% AH to $68.58.
    | Mon, Feb. 9, 4:22 PM | 19 Comments
  • Wed, Jan. 28, 6:15 PM
    • Qualcomm (NASDAQ:QCOM) partly blames its soft FY15 (ends Sep. '15) guidance on "a shift in share among OEMs at the premium tier, which has reduced our near-term opportunity for sales of our integrated Snapdragon" processors." That's undoubtedly a reference to Apple, which (though using Qualcomm's 4G baseband modems and other ICs) relies on its home-grown A-series app processors, and just reported huge FQ1 iPhone sales.
    • The mobile chip/IP giant also cites "heightened competition in China," where its issues are well-known and MediaTek/Intel have been hungry to gain share, and "expectations that our Snapdragon 810 processor will not be in the upcoming design cycle of a large customer's flagship device." Bloomberg has reported Samsung won't use the 810 in its Galaxy S6 (ostensibly due to overheating issues), instead relying on its own (Exynos) processors.
    • In addition to a Snapdragon processor (the 805), Qualcomm supplies a 4G baseband modem and several other ICs for many Galaxy S5 models. It's unknown if Samsung, which has developed an app processor with an integrated 4G baseband, will be using similar Qualcomm parts in the S6.
    • On the bright side, Qualcomm says it has resolved a dispute with a Chinese licensee. But it still believes other Chinese licensees aren't fully complying with their obligations.
    • QCT (chip division) sales rose 14% Y/Y in FQ1 to $5.2B, and division op. profit rose 26% to $1.15B. With China taking a toll, QTL (licensing division) revenue fell 4% to $1.82B, and op. profit 5% to $1.58B.
    • $1.7B was spent on buybacks. Qualcomm ended FQ1 with $31.6B in cash/marketable securities (equal to 29% of its current market cap), and no debt. Shares are down to $65.32 AH.
    • FQ1 results, PR
    | Wed, Jan. 28, 6:15 PM | 7 Comments
  • Wed, Jan. 28, 4:07 PM
    • Qualcomm (NASDAQ:QCOM): FQ1 EPS of $1.34 beats by $0.09.
    • Revenue of $7.1B (+7.3% Y/Y) beats by $160M.
    • Expects FQ2 revenue of $6.5B-$7.1B and EPS of $1.28-$1.40 vs. a consensus of $6.74B and $1.28.
    • Expects FY15 revenue of $26B-$28B and EPS of $4.75-$5.05 vs. a consensus of $27.81B and $5.21.
    • 270M FQ1 MSM chip shipments, at the high end of guidance of 250M-270M. 220M-240M expected in FQ2.
    • Shares -3.6% AH.
    • Press Release
    | Wed, Jan. 28, 4:07 PM | 12 Comments
  • Tue, Jan. 27, 5:35 PM
  • Nov. 19, 2014, 10:15 AM
    • Qualcomm (QCOM -1.2%) guides at its 2014 analyst day for an 8%-10% revenue CAGR from FY14 (ended in September) to FY19. The company adds it aims to grow EPS faster than revenue, and to return 75% of its free cash flow to shareholders.
    • Qualcomm has set an 85%-86% near-term op. margin target for its licensing unit (QTL), and an 86%-88% long-term target. The chip division (QCT) has been given an 18%-20% near-term op. margin target, and a 20%-22% long-term target. QTL and QCT respectively had 87% and 20% op. margins in FY14.
    • With Chinese payments remaining an issue, QTL is expected to have FY15 revenue of $7.3B-$8.3B vs. $7.6B in FY14. 3G/4G devices sales are expected to rise 7%-8%, and ASPs to fall 9%-10%.
    • QCT's revenue is expected to rise to $19.3B-$20.3B from FY14's $18.7B. MSM chip ASP is expected to fall 3%-5% due to a mix shift towards emerging markets and "premium tier mix challenges" - the latter could be a reference to the fact Apple (unlike Samsung) exclusively relies on its own app processors, albeit while relying on Qualcomm for basbeband modems and other ICs.
    • Qualcomm sold off two weeks ago after missing FQ4 estimates and providing light FQ1/FY15 guidance.
    • Analyst day slides (.pdf)
    | Nov. 19, 2014, 10:15 AM | 3 Comments
  • Nov. 6, 2014, 3:24 PM
    • Qualcomm (QCOM -9.3%) has received one downgrade (from Atlantic Equities) and a slew of target cuts after missing FQ4 estimates, issuing light FQ1/FY15 guidance, and disclosing U.S. and EU regulators have joined their Chinese counterparts in launching probes.
    • Regarding the FTC, Qualcomm says the agency is probing whether licensing policies violate FRAND terms, and that it could issue a fine or (notably) order policy changes. Qualcomm collects a ~3.25% royalty on 4G-only devices, and often gets a 4%-5% royalty on devices with 3G radios (e.g. most phones sold today).
    • Not surprisingly (given its July remarks about Chinese non-payment), IP licensing weakness was responsible for Qualcomm's FQ4 miss. The licensing division (still responsible for over half of op. profit) saw revenue fall 4% Y/Y to $1.8B, and op. profit drop 5% to $1.6B. By contrast, the chip division's revenue rose 9% to $4.8B, and (thanks in part to cost cuts) its op. profit rose 49% to $1.05B.
    • With China still a question mark, Qualcomm has set a conservative FY15 (ends Sep. '15) forecast for reported royalty-bearing device sales of $240B-$270B (-1% to +11% Y/Y). FQ1 reported device sales are expected to be down 4%-14% Y/Y.
    • "[Chinese] royalty discounts are not a question of if, but only a question of when and how much," thinks BofA/Merrill (Neutral) after meeting with local firms and regulators. Rosenblatt Securities offers a similar take.
    • Canaccord (Buy), however, thinks a poor Chinese outcome is now priced in. "With Qualcomm trading ... at 14x or 10x ex-cash our updated F2015 pro forma EPS estimate that excludes 266M 3G/4G devices from Chinese OEMs in our [licensing division] revenue estimate, we believe the valuation is compelling."
    • Cowen and RBC thinks Qualcomm might opt to raise debt to fund larger buybacks. $1.2B was spent on buybacks in FQ4, and $4.55B over the whole of FY14.
    | Nov. 6, 2014, 3:24 PM | 9 Comments
  • Nov. 5, 2014, 4:07 PM
    • Qualcomm (NASDAQ:QCOM): FQ4 EPS of $1.26 misses by $0.05.
    • Revenue of $6.69B (+3% Y/Y) misses by $330M.
    • Expects FQ1 revenue of $6.6B-$7.2B and EPS of $1.18-$1.30, below a consensus of $7.39B and $1.43.
    • Expects FY15 revenue of $26.8B-$28.8B and EPS of $5.05-$5.35, below a consensus of $28.9B and $5.58.
    • 236M FQ4 MSM chip shipments, in-line with guidance of 230M-245M. 250M-270M shipments expected in FQ1.
    • Shares -3.9% AH.
    • Press Release
    | Nov. 5, 2014, 4:07 PM | 14 Comments
  • Jul. 23, 2014, 5:29 PM
    • "We ... believe that certain licensees in China currently are not fully complying with their contractual obligations to report their sales of licensed products to us," Qualcomm (NASDAQ:QCOM) states in its FQ3 report.
    • The company thinks device sales are being under-reported, and that some firms might be holding off on getting licenses while the Chinese government continues its antitrust probe (widely seen as an attempt to negotiate lower 4G royalty rates). Qualcomm is also dealing with an SEC probe over alleged Chinese bribery.
    • While Qualcomm now expects 1.3B global 3G/4G device shipments in calendar 2014 - that's up from 1.075B-1.091B in 2013 and at the high end of a prior 1.22B-1.3B guidance range - it expects only 1.04B-1.13B to be reported to the company for royalty payments.
    • FQ3 EPS received a lift from $1.35B in buybacks. Qualcomm plans to spend a minimum of $1B on buybacks in FQ4.
    • A 31% increase in MSM shipments led to a 17% increase in chip division sales to $5B (lower ASPs?). Cost controls helped the division's op. profit rise 51% to $1.12B. FQ4 MSM chip sales are expected to be up 25% at the guidance midpoint.
    • On the other hand, licensing division revenue fell 3% to $1.8B, and segment op. profit fell 5% to $1.55B. With China weighing, Qualcomm expects reported device sales to be down 2%-12% Y/Y in FQ4.
    • FY14 3G/4G device ASP guidance has been tweaked to $222-$228 from $218-$228. That's nearly even with FY13's $223-$229.
    • FQ3 results, PR, slides (.pdf), device forecasts (.pdf)
    | Jul. 23, 2014, 5:29 PM | Comment!
  • Jul. 23, 2014, 4:05 PM
    • Qualcomm (NASDAQ:QCOM): FQ3 EPS of $1.44 beats by $0.22.
    • Revenue of $6.81B (+9% Y/Y) beats by $290M.
    • 225M MSM chip shipments, +31% Y/Y and above guidance of 198M-213M.
    • Expects FQ4 revenue of $6.5B-$7.4B and EPS of $1.20-$1.35 vs. a consensus of $7.15B and $1.39. Expects 230M-245M FQ4 MSM chip shipments.
    • Shares -0.7% AH.
    • Press Release
    | Jul. 23, 2014, 4:05 PM | 10 Comments
  • Jul. 22, 2014, 5:35 PM
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Company Description
Qualcomm Inc develops digital communication technology called CDMA (Code Division Multiple Access), & owns intellectual property applicable to products that implement any version of CDMA including patents, patent applications & trade secrets.