Phone
Revenue this year will be at least $9.85 billion, up from a previous projection of as much as $9.8 billion, the San Diego- based company said today in a statement. That beat the $9.72 billion average of estimates in a Bloomberg survey.
Consumers are buying more advanced phones that surf the Web and send e-mail even as the economy slows, helping sales of Qualcomms chips, Chief Executive Officer Paul Jacobs said. New networks for such phones in China are driving sales, said James Faucette, an analyst for Pacific Crest Securities Inc.
“The carriers in China are increasing their promotions of 3G products and services,” said Faucette, who rates the shares “outperform” and doesnt own any. “As those orders into China start to materialize, thats resulting in increased demand.”
Qualcomm gained $3.06, or 7.4 percent, to $44.42 in Nasdaq Stock Market trading at 10:26 a.m. New York time, and earlier rose as high as $44.59, the biggest jump in five months. The stock had advanced 15 percent this year before today.
The company also posted a second-quarter loss after booking $748 million in costs related to a legal settlement with Broadcom Corp. Yesterday, the company agreed to pay Broadcom $891 million in cash over four years to end a global dispute over handset-technology patents. Qualcomm said the deal doesnt affect its licensing-revenue model.
Strong 3G Demand
Sales this quarter will probably be $2.4 billion to $2.6 billion, Qualcomm said. Analysts had predicted $2.35 billion.
Qualcomms technology has grown more popular with the rise of so-called third-generation phones that offer high-speed Web. Unlike other chipmakers, Qualcomm gets most of its profit from licensing its technology, called code division multiple access, or CDMA.
“Worldwide demand for 3G enabled products and services remains strong,” Jacobs said on a conference call. “We continue to see healthy growth in CDMA device shipments, as well as significantly increased demand for our chip sets.”
Demand for 3G phones is picking up in countries such as China and India, where most handset users still have more basic devices, Chief Financial Officer Bill Keitel said in an interview.
The second-quarter net loss was $289 million, or 18 cents a share, compared with a profit $766 million, or 47 cents, a year earlier. Revenue fell 5.8 percent to $2.46 billion in the period, which ended March 29. Analysts had projected a profit of 29 cents a share on sales of $2.35 billion.
Global mobile-phone shipments will drop 8.3 percent this year, with declines as high as 25 percent in markets such as Japan and the U.S., according to IDC. Still, sales of so-called smart phones with high-speed Internet access will grow at 3.4 percent, according to the Framingham, Massachusetts-based researcher.
“The bright spot is smart phones,” said Ashok Kumar, a Collins Stewart analyst in Palo Alto, California. He recommends buying the shares and said he doesnt own any. He also estimates that overall phone-unit sales dropped 15 percent in the first three months of 2009 from the previous quarter.
Qualcomm surpassed Texas Instruments Inc. last year as the biggest maker of mobile-phone digital signal processors, the key chips in handsets. Texas Instruments last week posted profit and gave a forecast that exceeded analyst predictions. Still, the company also cautioned that demand wasnt rebounding; its customers are restocking their inventory.