Despite beating forecasts, Qualcomm financial results disappoint

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Qualcomm reported financial results for their first quarter, which ended on December 27, 2015, with numbers that beat forecasts despite being down year-over-year. Perhaps more disappointing though is the forecast looking ahead to the rest of 2016 as Qualcomm is faced with a slumping mobile device market that they think will be worse than what analysts are projecting.

Qualcomm says their quarterly earnings per share exceeded the high end of their initial estimates based on better than expected sales combined with cost cutting efforts undertaken. The cost cutting efforts included new license agreements with Chinese sources involved in their production chain.

Qualcomm says interest in their Snapdragon 820 processor has been strong, although they do not anticipate seeing an impact until the second half of 2016. For Q1, chip shipments are down 10% compared to the same quarter a year earlier. Despite the slide in chip shipments, Qualcomm did see actual devices shipped increase by 8% when comparing Q1 year-over-year. There was a slight, only one percent, slide in average selling prices from 2015 to 2016.

For the first quarter, Qualcomm saw revenues slide 19% compared to Q1 2015, falling to $5.8 billion. This translated to $1.7 billion operating income, which represented a 31% decrease versus the same period from a year earlier.

Qualcomm pointed out in their release that they have an agreement in place with TDK Corporation to launch a joint venture to focus on technology for use primarily in Internet of Things devices. Qualcomm’s investment in the venture will cost $1.2 billion with closing expected to occur in early 2017. Qualcomm will have a 51% stake in the joint venture and will reserve the right to buy out TDK Corporation at a later time. Clearly the move is intended to help protect the companies from the falling market for smartphones, notably in China where the market is maturing and is no longer seeing explosive growth rates.

source: Qualcomm (PDF)


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