Qualcomm posts $1.6B in net income as it regains footing in China

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Qualcomm’s latest quarterly performance indicates the company has regained its footing in China after paying a fine of roughly $1 billion last year to conclude a licensing probe.

But it will likely have to grow its business in younger emerging markets to maintain its pace over the next few years.

Qualcomm’s net income jumped 51 percent year over year on a 13 percent increase in revenue in its fiscal fourth quarter, The Wall Street Journal reported. Net income rose to $1.6 billion, or $1.07 per share, up from $1.06 billion, or 67 cents a share, during the prior year, and revenue increased to $6.2 billion from $5.5 billion.

“In our licensing business, we continue to execute well as we enable the industry to benefit from the tremendous opportunities around the world, including in China,” CEO Steve Mollenkopf said during a conference call with analysts, according to a Seeking Alpha transcript. “We have now signed license agreements with nine of the top 10 largest Chinese OEMs… We expect to continue to sign additional licenses with Chinese OEMs and increase the level of compliance throughout fiscal 2017.”

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Indeed, the company has made huge strides since it coughed up a reported $975 million in February 2015 to settle allegations by Chinese regulators that it charged “unfairly high” licensing fees. In addition to the fine – which has been described as a record amount in that market – Qualcomm agreed to a “rectification plan” to make specific changes to its business.

Cristiano Amon, executive vice president of Qualcomm Technologies, told investors that the company expects to duplicate 2016’s success in China over the next year. But while Qualcomm has clearly made progress in striking licensing deals with handset vendors, the outlook for the overall smartphone market there appears dubious.

The German market research firm GfK recently predicted smartphone demand in China will slide three percent year over year in 2017, falling to 434 million units, as operators cut back on device subsidies. Qualcomm is increasingly looking to overseas markets where smartphone penetration is lower to grow its licensing and chip businesses.

“China continues to be strong, and we saw another good quarter in the September quarter of 4G adds, and going forward we're expecting some pretty meaningful growth in 2017 coming from India and Southeast Asia, Middle East,” said Qualcomm President Derek Aberle. “So there's definitely big markets where we see the opportunity for a lot of continued growth.”