QUALCOMM, the world’s biggest seller of smartphone processors, gave a strong revenue forecast for the current period, indicating that demand for phones is rebounding.
Revenue in the quarter ending in September will be US$9.5 billion to US$10.3 billion, the company said on Wednesday (Jul 31). Analysts had estimated US$9.7 billion on average. The latest results also topped projections, helping send the shares up more than 6 per cent in extended trading.
The outlook provides further evidence that the smartphone industry is emerging from a slump. 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.
There’s growing optimism about a “sharp” uptick in global smartphone demand during the second half of the year, Bloomberg Intelligence analysts Kunjan Sobhani and Oscar Hernandez Tejada said.
Qualcomm shares rose as high as US$195.79 following the announcement. They had earlier closed at US$180.95 in regular New York trading on Wednesday, leaving them up 25 per cent for the year.
In the third quarter, which ended Jun 23, profit was US$2.33 a share, excluding some items. Revenue rose 11 per cent to US$9.39 billion. Analysts had estimated a profit of US$2.24 a share and sales of US$9.21 billion.
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Phone-related revenue rose 12 per cent to US$5.9 billion in the period. Automotive sales, meanwhile, surged 87 per cent to US$811 million in the quarter.
Fourth-quarter profit will be US$2.45 to US$2.65 a share, excluding certain items, Qualcomm said. That compares with a projection of US$2.45 a share. The outlook outshined that of Arm Holdings, another chip company closely tied to the phone industry. Its shares tumbled after Arm maintained a forecast that fell short of analysts’ estimates.
Phone makers have been helped by a spending recovery among Chinese consumers, and that’s translating into more orders for component makers such as Qualcomm.
Under chief executive officer Cristiano 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, which reports earnings on Thursday, and Samsung Electronics, 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. BLOOMBERG
