Wednesday, January 26, 2011

Qualcomm Inc. (NASDAQ: QCOM): Q1 Earnings Preview 2011

Qualcomm Inc. (NASDAQ: QCOM), the world largest phone-chip maker, is scheduled to release its fiscal first-quarter earnings after the closing bell on Wednesday, January 26, 2011. Analysts, on average, expect the company to report earnings of 72 cents per share on revenue of $3.20 billion. In the year ago period, the company reported earnings of 62 cents per share on revenue of $2.67 billion.

Qualcomm Inc. engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. The company operates in four segments: Qualcomm Code Division Multiple Access Technologies, Qualcomm Technology Licensing, Qualcomm Wireless and Internet, and Qualcomm Strategic Initiatives.

In the preceding fiscal fourth quarter, the San Diego, California-based companny's net income was $865 million, or 53 cents a share, from $803 million, or 48 cents a share, in the year-ago quarter. On an adjusted basis, the company earned 68 cents a share in the latest quarter. Revenue increased to $2.95 billion from $2.69 billion. Analysts, on average, expected the company to report earnings of 59 cents per share on revenue of $2.85 billion. 

At its last earnings call in November, the company said that it expects fiscal first quarter earnings in the range of 58 cents to 62 cents per share and non-GAAP earnings in a range of 70 cents to 74 cents per share.  For the fiscal year 2011, the company expects earnings in the range of $2.08 to $2.22 per share and non-GAAP earnings in a range of $2.63 to $2.77 per share. Full-year revenues are expected to be in a range of $12.4 billion to $13.0 billion. The company said that it will be able to raise its revenue and EPS by at least 10% for the next five years. 

Qualcomm has benefited from strong consumer demand for smartphones. According to analysts, smartphone shipment as a percentage of total mobile phone shipment will increase from 15% in 2009 to 45% by 2014.The company's next-generation snapdragon platform is making tremendous progress. A number of groundbreaking devices like Google's Nexus One, the HTC Incredible, Sprint's EVO 4G and the Dell Streak tablet are powered by Snapdragon processor. 

Qualcomm also stands to benefit from growing demand for 3G data services. The company collects a royalty for every 3G device sold worldwide. 3G technology adoption increases the addressable market for which it sells chipsets In addition, it holds patents on CDMA technology and earns royalties on all CDMA mobile phone sales. In the near term, Verizon(NYSE: VZ) CDMA iPhone looks to be a boom for Qualcomm. Apple's (NASDAQ: AAPL) introduction of a CDMA version of the iPhone means Qualcomm will collect not only a patent royalty as it does with the AT&T iPhone, but since the Verizon iPhone also uses Qualcomm's wireless chip, the company will enjoy an added pop to its chip revenue.

Emerging super-fast 4G Long Term Evolution (LTE) technologies have become another boost for Qualcomm. The growing acceptance of LTE technology has prompted the mobile handset manufacturers to develop phones that will be compatible with this network. A major near-term catalyst for Qualcomm is the expected launch of CDMA iPhone. The 3G to LTE transition is underway globally with 156 operators in 64 countries currently investing in this transition. In the US, Verizon is rolling out its LTE network and AT&T (NYSE:T) plans to start its roll out in mid-2011. 

Among other developments, Qualcomm recently announced its acquisition of Atheros (NASDAQ: ATHR) for $3.2 billion to diversify its product portfolio beyond mobile phones and expand its addressable market into game consoles, media players, tablets and TVs. This acquisition will give Qualcomm a tremendous opportunity to leverage Atheros’ Wi-Fi technology capability in non-handset devices and become more competitive with players like Broadcom (BRCM), Marvell (NASDAQ: MRVL), Infineon (now acquired by Intel (INTC)) and Texas Instruments (NYSE: TXN).

In terms of stock performance, Qualcomm shares have gained nearly 40 percent over the past year.

Full Disclosure: None.
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