Qualcomm cuts revenue outlook, warns of further share losses at Samsung

Qualcomm (NASDAQ:QCOM) reported falling earnings in the first quarter, and reduced its 2015 financial outlook from its previous expectations. The company also warned it expects Samsung Electronics to continue to move away from Qualcomm chips in future phones--exacerbating a trend Samsung started with its new flagship Android smartphone, the Galaxy S6, which dropped Qualcomm chips in favor of Samsung's own silicon.

"While we remain confident in the significant growth opportunities ahead, we are reducing our QCT outlook for fiscal 2015, primarily due to the increased impact of customer share shifts within the premium tier and a decline in our share at a large customer," Qualcomm CEO Steve Mollenkopf said in a statement.

 "We anticipate a similar share picture to what you see on GS6," Mollenkopf added during the company's quarterly conference call with analysts, according to a Seeking Alpha transcript of the event.

Qualcomm's first-quarter earnings clocked in at $1.1 billion, down from the $2 billion it reported in the same quarter last year. For the full year 2015, Qualcomm said it now expects revenues between $25 billion and $27 billion, down from its previous forecast of between $26.3 billion and $28 billion.

"Clearly, we are not pleased with our reduced outlook," Mollenkopf said during the company's quarterly conference call. "Accordingly, we have initiated a comprehensive review of our cost structure in QCT and throughout the company. The goals of this review are to align our cost structure with the changing marketplace and improve efficiency. We have begun a comprehensive assessment of costs and opportunities for greater efficiency company-wide with the help of an outside expert and will be reporting on those initiatives on the Q3 earnings call."

Qualcomm's first-quarter financials also were dragged by the $975 million fine the company agreed to pay in China to end a probe of its licensing and business practices there. Qualcomm executives said the company has been making progress in the Chinese market, but hinted that Qualcomm may take legal action against Chinese companies it believes owe it licensing payments.

Moreover, Qualcomm's challenges on the patent-licensing front appear set to continue. The company said Korea's Fair Trade Commission is opening an inquiry into the company's business there, likely with an emphasis on Qualcomm's licensing business.

For more:
- see this Qualcomm release
- see this Re/code article
- see this Reuters article

Special Report: Wireless in the first quarter of 2015

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