Qualcomm CFO: Chipset margins will decline as smartphone sales increase

Chipmaker Qualcomm (NASDAQ:QCOM) expects to see a decline in its operating margins for its chipset business in the coming year as smartphone growth drives more competitive pricing.

Speaking at the Morgan Stanley Tech, Media & Telecom Conference, Qualcomm CFO Bill Keitel said the company expects to see a decline in chipset operating margins from 30 percent in the fiscal first quarter to a range of 22 percent to 24 percent for the fiscal year. Keitel said the company made a decision to offer competitive pricing to help drive smartphones into the mass market. "To help the market come about, we made the decision to come to market earlier at a lower price than we could have," he said, according to Dow Jones Newswires.

Keitel added that in the next few years, he expects operating margins for chipsets to be in the mid-20 percent range.

Qualcomm posted a net profit of $1.17 billion in the first fiscal quarter, up 39 percent from $841 million in the year-ago quarter. The company also shipped a record 118 million CDMA-based Mobile Station Modem chipsets in the quarter, up 28 percent year-over-year and up 6 percent sequentially.

Interestingly, Keitel said Qualcomm's research and development will equal about 17 percent of the company's revenue. This is a decline from the past couple of years where Qualcomm was devoting 22 percent to 23 percent of revenue to R&D. In particular, the company was helping enable new technologies like Microsoft Windows Phone 7. Keitel added that he believes that Nokia (NYSE:NOK) could launch a Windows Phone 7 device by Christmas. Last month, Nokia forged an alliance with Microsoft (NASDAQ:MSFT) to make Windows Phone 7 Nokia's primary smartphone platform.

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