Tuesday, July 19, 2011

Qualcomm Inc. (NASDAQ: QCOM): Q3 Earnings Preview 2011

Qualcomm Inc. (NASDAQ: QCOM), the world largest phone-chip maker, is scheduled to release its fiscal third-quarter earnings after the closing bell on Wednesday, July 20, 2011. Analysts, on average, expect the company to report earnings of 71 cents per share on revenue of $3.59 billion. In the year ago period, the company reported earnings of 57 cents per share on revenue of $2.70 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 second quarter, the San Diego, California-based companny's net income was $999 million, or 59 cents a share, compared with a profit of $774 million, or 46 cents a share, in the same period last year. On an adjusted basis, the company earned 86 cents a share in the first quarter. Revenue increased to $3.875 billion from $2.663 billion in the prior year quarter.. Analysts, on average, expected the company to report earnings of 80 cents per share on revenue of $3.62 billion. 

At its last earnings call in April, the company said that it expects GAAP earnings to be in the range of 60 cents to 64 cents per share, non-GAAP earnings of 68 cents to 72 cents per share and revenues of $3.35 billion to $3.65 billion.

The company also raised its fiscal year 2011 guidance. The company now expects full-year GAAP earnings per share in the range of $2.51 to $2.59 per share, from the previous outlook of $2.32 to $2.46 per share. The company now expects fiscal 2011 non-GAAP earnings to be between $3.05 to $3.13 per share, compared to prior outlook of $2.91 to $3.05 per share. The company raised its revenues outlook to a range of $14.1 billion to $14.7 billion from the prior estimates of $13.6 billion- $14.2 billion.

Qualcomm has benefited from strong consumer demand for smartphones and tablets, as well as other device categories. The company's next-generation snapdragon platform is making tremendous progress. A number of groundbreaking devices like Verizon iPhone, Google's Nexus One, HTC Desire, Sprint's EVO 4G and the Dell Streak tablet are powered by Snapdragon processor. Qualcomm still draws royalties from the GSM iPhone on AT&T (NYSE:T) through its patents, though the device does not employ Qualcomm's chips. The company was also a key launch partner for Windows Phone 7 and has its chips in the next generation of Palm devices coming from H-P later this year, including the TouchPad tablet.

The global market for cellular baseband chipsets surged 20% last year to $13.2 billion, according to wireless research firm Strategy Analytics.

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. 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. 

Full Disclosure: None.
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