A lot has been happening in the tech sector recently: new benchmarks are being set for smartphones, quite a few new tablets are trying to break the market jinx, and revolutionary 4G networking has been boosted. But along with the boost, there has also been an increase of competition and with the passage of time, this competition has been on the rise like never before. One of the main components which have revolutionized every tech movement is the processor chipset. However, the two giants in the chipset market have had a neck-to-neck run in the last quarter, namely Intel (INTC, Financial) and Qualcomm (QCOM, Financial). Apart from these giants, a lot of Chinese options have also been in the run, significantly denting the markets of the giants dotting in and around Taiwan.
Qualcomm, after having a fair run with its new snapdragon processor powering a number of smartphones and tablets, has reported its fourth quarter results. Let us take a look at what are the number mixes it reported and how much it proved itself against street expectations.
Qualcomm Q4 Numbers
Qualcomm reported its Q4 numbers which missed the analysts expectations. The mobile chipmaker reported $6.69 billion in revenues (up 3 percent over last year) and earnings per share of $1.26. However, based upon the kind of advances the mobile device segment has made in the last quarters, the street expectations from Qualcomm were loftier and stood at $7.02 billion and an EPS of $1.31.
“We are pleased to report another year of record financial performance as our 3G/4G LTE multimode and other advanced technologies continue to enable the growth of wireless data around the world, driven by our broad chipset roadmap,” said Qualcomm CEO Steve Mollenkopf in a statement.
China has been the long serving pain for the chipset honcho. Apart from stiff competition from economic Chinese substitutes for the popular chipsets, there has been a dispute over royalties with Chinese customers. This has affected Qualcomm’s stock in recent quarters. In Q3, Qualcomm’s shares dropped the most in three years as a result of this dispute. Qualcomm is also the subject of an investigation by a Chinese regulator, the China National Development and Reform Commission (NDRC). And China is still an issue for Qualcomm in this quarter, too.
“We also believe that certain licensees in China currently are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes certain licensees underreporting a portion of their 3G/4G device sales and a dispute with a licensee),” Qualcomm was quoted as saying in a press release, “and that unlicensed companies may seek to delay execution of new licenses while the NDRC investigation is ongoing.”
However, Qualcomm cannot wipe off China from its business map owing to its major market for 3G/4G LTE chipset as the country is currently focused on covering its whole landmass under high-speed 4G network due to the rapid urbanization of China.
“We expect continued strong growth of 3G and 3G/4G multimode devices around the world, particularly in China with the anticipated launch of LTE”, said Mollenkopf in a press release. ”Our fiscal 2015 outlook reflects continued LTE leadership in our semiconductor business and is tempered by the issues we are facing in China related to our licensing business.”
In this earnings call, the Qualcomm management declared its revenue forecast for the fiscal year 2015. The revenue is supposed to range between $26.8 billion and $28.8 billion going by the management guidelines for the next fiscal.
Soon after the Q4 earnings report revelation, Qualcomm shares saw volume sell off and had to take a beating to the tune of 10% downwards in the market in today’s ongoing trading session.
Our Understanding
According to our understanding, Qualcomm is a strong hold and for those who are yet to decide a position in the chipset giant, it would be a good opportunity to buy in with the dip and add it to your investment portfolio.
The reason is very simple. If you had followed our previous articles here about the flurry of smart gadgets that have been launched this festive season, the reason will be quite clear. All the wonder gadgets launched this year has one thing in common – the latest snapdragon processor from Qualcomm, among the most prominent are the new iPhones which have already claimed the throne of global popularity in the smartphone arena. Through the festive season as the sales and demand of these wonder gizmos pick up, the demand for Qualcomm will obviously rise thus bolstering its revenue and earnings through the next couple of quarters. Right now it would be best to wait and watch how the new gizmos fare in the market over the next few months and accordingly take a call in altering your portfolio pertaining to Qualcomm.
