Qualcomm Gives Solid Outlook in Sign of Smartphone Recovery
(Bloomberg) — Qualcomm Inc., the world’s biggest seller of smartphone processors, gave an upbeat forecast for sales and profit in the current period, suggesting demand for handsets is increasing after a two-year slump.
Revenue in the three-month period ended in June will be $8.8 billion to $9.6 billion, the company said in a statement Wednesday. Excluding certain items, earnings will be $2.15 to $2.35 a share. Analysts had projected sales of $9.08 billion and profit of $2.16 a share.
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The outlook signals that the smartphone market has begun to bounce back, tracking with Qualcomm’s forecast that demand would gradually recover in 2024. The San Diego-based company also reported better-than-predicted results in the second quarter — buoyed by headway in China, where it sells technology to local phone manufacturers.
The shares rose about 3% in extended trading following the announcement. They had earlier closed at $164.11 in New York trading, a gain of 13% this year.
Over the longer term, Chief Executive Officer Cristiano Amon has been trying to decrease reliance on phone chips by pushing into personal computers, vehicles and other markets. But Qualcomm remains heavily dependent on demand for handsets, particularly in China.
In the second quarter, which ended March 24, profit was $2.44 a share, excluding some items. Revenue rose 1% to $9.39 billion. Analysts had estimated profit of $2.32 and sales of $9.32 billion.
Revenue from the smartphone segment gained 1% last quarter, a slowdown from the 16% increase in the previous three months. But China was a bright spot, Qualcomm said in a slide presentation. Sales to phone makers in that country, the biggest market for the devices, surged 40% in the first half of the fiscal year, “reflecting our strong competitive positioning and recovery of demand.”
Qualcomm’s Internet of Things group, which creates electronics for web-connected appliances, has suffered from a glut of inventory. Revenue at that unit was down 11% last quarter. Qualcomm’s automotive sales rose 35%.
The company’s main product is a processor that runs many of the world’s best-known phones, including many of Samsung Electronics Co.’s Galaxy line. It also sells the modem chips that connect Apple Inc.’s iPhone to networks.
An additional portion of Qualcomm’s profit comes from licensing the fundamental technology that underpins all modern mobile networks. Phone manufacturers pay these fees whether they use Qualcomm-branded chips or not.
(Updates with more from results starting in third paragraph.)
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