Qualcomm: Outlook for 3G and 4G device shipments less rosy

Qualcomm (NASDAQ:QCOM) is struggling with supply constraints and a reduced outlook for global cellular device shipments, but executives cited a number of bright spots, including several related to spectrum and the company's Wi-Fi chip business during a conference call to review fiscal third-quarter results.

Chip supply constraints dragged on sales and led Qualcomm's third-quarter results to slip under analyst estimates. The company's net income for 2012's fiscal third quarter, ended June 24, rose 24 percent year-over-year to reach $1.21 billion, compared with a profit of $1.03 billion a year earlier. Quarterly revenue reach $4.63 billion, up 28 percent from $3.62 billion in 2011's same period, but analysts had expected to see 2012 third-quarter revenue of more than $4.67 billion.

Qualcomm slashed its revenue target for fiscal 2012, which ends in September, to a range of $18.7 billion to $19.1 billion from $18.7 billion to $19.7 billion.

The vendor enjoyed strong year-over-year growth in its chipset and licensing businesses during the recently ended quarter, but grim economic conditions worldwide drove the company to reduce its forecast for global shipments of 3G and 4G devices in the current calendar year to between 875 million and 935 million. Nonetheless, the lowered estimates would still represent an increase of 14 percent over 2011, assuming the results come in at the midpoint of the forecast.

In a conference call to discuss the recently ended quarter's results, Paul Jacobs, Qualcomm chairman and CEO, said the company expects a strong December quarter for its semiconductor business. That is due to a host of expected product releases, including perhaps Apple's (NASDAQ:AAPL) iPhone 5, which is expected to have LTE connectivity, and Microsoft Windows 8 tablets.

However, Qualcomm is struggling to meet demand for 28-nanometer chips, with supplies expected to remain tight for several more months. Supply and demand for the chips should balance better by year's end. The company said it is working with four foundries at that node to try to boost supplies.

Jacobs also provided insights into other parts of Qualcomm's business empire. He noted that Europe's CEPT (European Conference of Postal and Telecommunications Administrations) has made an initial decision, subject to final approval, to harmonize L-Band spectrum for supplemental downlinks. "This is the same spectrum that we own in the UK. This is an important milestone and opens up the potential to have our carrier aggregation technology deployed widely across Europe," said Jacobs.

He also noted that during the recently ended quarter, Bharti Airtel bought a 49 percent stake in Qualcomm's Broadband Wireless Access (BWA) license entities in India. "One of our key objectives from the outset of our investment has been to include a strong Indian operator as our partner in the Indian venture with the scale, experiences and resources to deploy and operate an LTE TDD network. We're very pleased to have Bharti's participation and support in this effort," said Jacobs.

Turning to Qualcomm's connectivity business, Steve Mollenkopf, president and COO, noted the company is sampling 802.11ac solutions for mobile computing and networking products. The solutions "are aligned with the Wi-Fi industry's certification timeline to allow 802.11ac interoperable products in market by early 2013," he said.

Qualcomm gained its Wi-Fi chip business via the $3.1 billion purchase of Wi-Fi chip maker Atheros Communications, which closed in May 2011.

Mollenkopf said Qualcomm's modem leadership continues to be a differentiator for design wins in numerous devices, including smartphones, tablets, modules and Wi-Fi personal hotspots. "While many companies are still commercializing their first LTE products, we have already announced our third-generation LTE chipsets and will continue investing in our modem road map to maintain our leadership," he added.

On a new legal issue, Jacobs revealed during the conference call that Qualcomm is the subject of investigations by the Securities and Exchange Commission as well as the Department of Justice in relation to "special hiring consideration, gifts or other benefits" that the company believes were provided to individuals associated with Chinese state-owned companies or agencies. Jacobs said it appears the monetary value of these benefits in aggregate was than $250,000, excluding employment compensation.

For more:
- see this Qualcomm release
- see this Reuters article
- see this ComputerWorld article
- see this EE Times article

Special Report: Wireless in the second quarter of 2012

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