Qualcomm's earnings weighed down by BlackBerry refund

Bruno Cirelli
Aprile 20, 2017

Chip maker Qualcomm might be happy with its recent fiscal performance, but a legal stoush with tech giant Apple might affect its profits for the third quarter of 2017. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of $1.20 per share.

Shares of Qualcomm were down 0.5% to $52.41 on Wednesday afternoon and are off almost 20% year to date.

Excluding the refund and some other charges, Qualcomm posted revenue of $6 billion and earnings of $2 billion, or $1.34 per share.

For the quarter ended in March, analysts are expecting the company to report earnings of $1.19 per share on revenue of $5.9 billion.

Apple's contract manufacturers reported, but underpaid, royalties in Q2'FY17.

"We have successfully navigated challenges like this in the past, and we have confidence in the sustainability of our licensing business", said Chief Executive Steve Mollenkopf in a conference call with analysts. Qualcomm filed a countersuit last week that didn't pull any punches.

That compares with sales of $5.6 billion and earnings of $1.2 billion, or 78 cents per share, for the same quarter a year ago. On an adjusted basis, Qualcomm reported revenue of $5.99 billion with non-GAAP earnings of $1.34 per share. However, our revenues were not negatively impacted as the contract manufacturers acknowledged the amounts are due and the underpayment was equal to the amounts that Qualcomm has not paid Apple under our Cooperation Agreement that are now in dispute.

Beyond its business licensing patents to phone makers, the San Diego, Calif., company holds dominant market share in mobile chips.

The company also said there was increased demand for its Snapdragon mobile chips, particularly in China, boosting revenue by 10 percent in its chip-making unit.

Analysts were clearly anxious that contract manufacturers may continue to withhold payments, even though Qualcomm's contract with Apple ended in December. Segment operating income rose 179% to $475 million. Qualcomm said it expects iPhone royalties to be withheld only up to that amount. The purchase, which hasn't yet closed, is a bet that Qualcomm can boost sales of its own products through NXP's automotive relationships and extend its role in the Internet of Things, the trend toward outfitting a wide variety of everyday devices with computing and communications capability.

Qualcomm said Wednesday the deal is on track to close by the end of the year.

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