Thursday, 8 November 2012

Right on Qualcomm (QCOM) - Profits Beat Estimates

A month ago or so, I wrote an article for Marketwatch Columnist contest on alternative ways to invest in the smartphone and tablet revolution.  Breaking down their components, it was clear what were the big potential benefactors from both iOS and Android.  I named a few of them in my article.  In the last couple weeks, its clear that those projections are ringing true.  Samsung recently posted record profits, as did ASUStek, both largely benefiting from the smartphone and tablet growth.

Next up from my list is Qualcomm, who I pointed out was responsible for the cellular chip (especially with the top of the line LTE chips).  Due to space, I omitted discussion about their own SoC's like the Snapdragon which is powering many of the top Android phones.  Well QCOM just pointed their earnings yesterday after the close, and as expected, they got a huge boost from the new mobile industry.  QCOM stock is up 8% after the report.  

From Bloomberg:

Earnings in the current period will be 90 cents to 98 cents a share on revenue of $5.6 billion to $6.1 billion, San Diego- based Qualcomm said yesterday in a statement. Analysts on average had projected net income of 86 cents on sales of $5.33 billion, according to datacompiled by Bloomberg.

Unlike chipmakers such as Intel Corp., which are being hurt by slack personal-computer sales, Qualcomm is benefiting as consumers in developed nations snap up the newest phones and as those in emerging markets upgrade their devices, Chief Executive Officer Paul Jacobs said. The company also is pulling in more license revenue from its technology standards that provide high- speed data connections in smartphones.

“Qualcomm has absolutely been one of the prime beneficiaries in smartphones and tablets,” said Mike Burton, an analyst at Brean Capital LLC. “This is a very strong report.” 

Net income in the fourth quarter, which ended Sept. 30, was $1.27 billion, or 73 cents a share, compared with $1.06 billion, or 62 cents, a year earlier. Sales rose 18 percent to $4.87 billion. Analysts on average had predicted sales of $4.65 billion.
Profit before certain items in fiscal 2013 will be $4.12 to $4.32 a share on revenue of $23 billion to $24 billion, Qualcomm said in the statement. Analysts on average had projected profit of $4.13 a share and sales of $21.7 billion, according to data compiled by Bloomberg.
The majority of Qualcomm’s revenue comes from baseband chips, which connect phones to cellular networks, sold to wireless device makers such as Samsung Electronics Co., Apple Inc. and HTC Corp. (2498) The bulk of the company’s profit comes from the licensing of so-called code division multiple access technology, a radio-communications standard used in other chips, handsets and phone systems.
Some 711.4 million smartphones will be sold this year, a gain of 44 percent, Canaccord Genuity Inc. analysts projected in a report. The market will grow 35.4 percent next year, the analysts estimated.

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