Yahoo Finance Qualcomm Shares Slide on Concern About Slow Smartphone Recovery
(Bloomberg) -- Shares of Qualcomm Inc., the world’s biggest seller of smartphone processors, fell as much as 7.7% on concern that the phone market is recovering more slowly than investors had hoped.
Most Read from Bloomberg
Singer Akon’s Multibillion-Dollar Futuristic City in Africa Gets Final Notice
New York City’s Outdoor Dining Sheds Will Start Disappearing
The 5 Coastal States That Face the Most Devastating Flood Risk
Paris Spent €1.4 Billion to Clean Up the Seine. Has It Worked?
Africa’s Richest City Needs $12 Billion to Fix Infrastructure
Though Qualcomm projected stronger sales and earnings than analysts anticipated for the current quarter, it said that phone shipments are only gradually rebounding from a prolonged slump. Qualcomm Chief Executive Officer Cristiano Amon said the company expects units to be either “flattish” or up by a single-digit percentage this year.
Qualcomm’s earnings forecast initially sent its shares on a rally in extended trading on Wednesday, but the stock retreated following the remarks from Amon and other executives on a conference call with analysts. The shares slid as low as $167.06 in New York on Thursday, the biggest intraday decline in two weeks.
Comments by executives also undermined confidence that the recovery will pick up pace. Chief Financial Officer Akash Palkhiwala said he expects growth in the December quarter to be little changed from a year earlier, when sales increased 5%. Analysts had been predicting a rise of 9%.
Arm Holdings Plc, another chip company that’s heavily reliant on phone sales, also gave a disappointing outlook during its earnings report Wednesday. The big picture message: Though higher-end phones are helping fuel sales for suppliers like Qualcomm and Arm, there hasn’t been a widespread surge in demand for phones in general.
Qualcomm’s revenue in the quarter ending in September will be $9.5 billion to $10.3 billion, the company said Wednesday. Analysts had estimated $9.7 billion on average. The latest results also topped projections, helping fuel the earlier rally.
Investors have been looking for signs that the smartphone industry is finally emerging from a slowdown. Qualcomm is the largest maker of processors and radio chips that handle the main functions in the devices. That makes it a bellwether for one of the largest markets in electronics.
Qualcomm shares had gained 25% this year heading into the earnings report, reflecting optimism that a recovery was underway.
In the third quarter, which ended June 23, profit was $2.33 a share, excluding some items. Revenue rose 11% to $9.39 billion. Analysts had estimated profit of $2.24 a share and sales of $9.21 billion.
Phone-related revenue rose 12% to $5.9 billion in the period. Automotive sales, meanwhile, surged 87% to $811 million in the quarter.
Fourth-quarter profit will be $2.45 to $2.65 a share, excluding certain items, Qualcomm said. That compares with a projection of $2.45 a share.
Under Amon, the San Diego-based company is pushing its products into personal computers and vehicles — an effort to reduce its reliance on phones. But the smartphone market still accounts for an outsized portion of its revenue.
Apple Inc., which reports earnings on Thursday, and Samsung Electronics Co., a maker of Android-based phones, are major phone customers. Apple’s iPhone relies on Qualcomm for connectivity chips, not the main processor, and the Cupertino, California-based company is attempting to develop its own radio components.
Another main driver of Qualcomm’s profit comes from licensing the fundamental technology that underpins all modern mobile networks. Phone manufacturers pay these fees to Qualcomm whether or not they use its chips.
Most Read from Bloomberg Businessweek
Made-in-China Goes Upscale as a New Generation of Brands Battles Slowdown
Retailers Locked Up Their Products—and Broke Shopping in America
©2024 Bloomberg L.P.
