(RTTNews) - The wireless kingpin QUALCOMM Inc. (QCOM) on Thursday wrapped up a
profitable year, reporting fourth quarter earnings that topped analysts'
estimates by a penny on 28% higher revenues. However, on a sequential basis, the
company's quarterly profits were down 5%.
The California based company reported GAAP net income for the fourth quarter of
$614 million or $0.36 per share, compared to $538 million or $0.32 per share in
the same period last year.
Excluding items, QUALCOMM's pro forma net income for the quarter was $705
million or $0.42 per share, in comparison with $543 million or $0.32 per share
in the year ago quarter. The company's earnings topped the $0.41 per share
consensus estimate of 27 analysts polled by Thomson FirstCall.
The fourth quarter fiscal 2006 pro forma bottomline exclude $0.05 loss per share
attributable to estimated share-based compensation and $0.01 loss per share
attributable to certain tax adjustments related to prior years.
QUALCOMM's revenue for the quarter jumped 28% to $1.99 billion from $1.56
billion in the year earlier quarter. Wall Street analysts had a revenue
consensus estimate of $1.97 billion for the quarter.
Equipment and service revenue for the quarter rose to $1.26 billion from $1.03
billion in the prior year quarter. Licensing and royalty fee added $735 million
to the total quarterly revenue, compared to $525 million in the same period last
year.
The company's pro forma Research and Development expenses for the quarter rose
33% to $338 million from $255 million in the same period last year due to
additional engineering resources for the development of integrated circuit
products and other technologies to support low-cost phones, multimedia
applications, etc.
The company's selling, general and administrative expenses on a pro forma basis,
increased 41% to $237 million from $168 million in the year ago quarter largely
due to increases in employee related expenses.
For the year ended September 24, 2006 the company's GAAP net income rose to
$2.47 billion or $1.44 per share from $2.14 billion or $1.27 per share last
year.
Excluding items, QUALCOMM's annual pro forma net income was $2.8 billion or
$1.64 per share, compared to $1.97 billion or $1.16 per share prior year.
The fiscal 2006 pro forma bottomline excludes $0.02 loss per share related to
the QSI or (QUALCOMM Strategic Initiatives) segment, $0.19 loss per share
attributable to estimated share-based compensation, $0.02 net earnings per share
attributable to certain tax adjustments related to prior years and $0.01 loss
per share related to acquired in-process R&D expense.
The company's annual revenues climbed 33% to $7.53 billion from $5.67 billion in
the previous year. Wall Street analysts expected the company to earn $1.63 per
share, on revenues of $7.49 billion for the year.
During the year, QUALCOMM shipped 207 million MSM chips, compared to 151 million
last year. The wholesale average selling price of CDMA/WCDMA handset unit was
about $215 in fiscal 2006.
As of September 2006, there were about 402 million subscribers using third
generation CDMA-based networks worldwide, compared to 273 million users at the
same point in 2005.
QUALCOMM Strategic Initiatives (QSI)
The QSI segment includes the company's strategic investments, including its
MediaFLO USA subsidiary, and related income and expenses. For the fourth quarter
of fiscal 2006, the results of QSI segment included $38 million in operating
expenses, primarily related to MediaFLO USA, partially offset by $12 million in
realized gains on investments.
Outlook
Looking ahead to the first quarter of fiscal 2007, QUALCOMM expects GAAP
earnings to be in the range of $0.35 - $0.37 per share. The loss per share
attributable to QSI segment is expected to be $0.02 in the first quarter.
On a pro forma basis, the company anticipates earnings of $0.42 - $0.44 per
share range, on revenues of $1.98 - $2.08 billion range for the first quarter.
Wall Street analysts expect the company to earn $0.44 per share, on revenues of
$2.07 billion.
In the first quarter of fiscal 2007, QUALCOMM expects to ship about 55 million -
58 million MSM chips, compared to 47 million MSM chips in the first quarter of
fiscal 2006. With the demand for CDMA handsets on the rise, the company's
CDMA/WCDMA handset shipments for the first quarter of fiscal 2007 are projected
at 74 million - 76 million units, compared to 52 million units shipped in the
same quarter last year.
Qualcomm expects the wholesale average selling price of CDMA/WCDMA handset to
fall to $209 in the first quarter from $215 in the first quarter of fiscal
2006.
For fiscal 2007, the company sees annual GAAP earnings per share in the range of
$1.45 - $1.50 and pro forma earnings in the range of $1.76 - $1.81 per share.
Revenues for fiscal 2007 are anticipated to range between $8.1 billion and $8.6
billion. On average, 28 analysts polled by Thomson FirstCall expect the company
to earn $1.82 per share, on revenues of $8.64 billion for fiscal 2007.
The wholesale average selling price of CDMA/WCDMA handset is expected to fall to
$205 in fiscal 2007 from $215 in fiscal 2006.
The CDMA gorilla, which had cash equivalents and marketable securities of $9.9
billion at the end of the fourth quarter of fiscal 2006, announced a cash
dividend of $0.12 per common share on October 5. The dividend is payable on
January 4, 2007 to stockholders of record at the close of business on December
7, 2006.
QUALCOMM's Legal Wrangles
There seems to be no love lost between QUALCOMM and Broadcom. The pair is
involved in a series of litigations against each other since 2005, related to
wireless Internet equipment, technologies powering cell phones, as well as
Bluetooth devices.
The latest, which made headlines was the suit filed by QUALCOMM against Broadcom
relating to W-CDMA, the variant of Third generation technology. QUALCOMM alleged
that Broadcom has stolen its trade secrets to compete unfairly in the sales of
W-CDMA chipsets.
A ruling pronounced on October 30, 2006 went in favor of QUALCOMM, which
prohibited Broadcom from using or disseminating confidential QUALCOMM WCDMA
trade secrets.
Broadcom, Nokia, Texas Instruments and Ericsson are among the six companies that
have raised legal complaints about Qualcomm's patent-licensing tactics. In early
September 2006, an antitrust lawsuit filed by Broadcom against Qualcomm was
dismissed by the U.S. District Court of New Jersey. In dismissing the case, the
judge said, Broadcom's claims that Qualcomm was using its dominance in the cell
phone chip business to stifle competition, fell short of several legal standards
under antitrust law.
QUALCOMM has also sued mobile device maker Nokia in the United Kingdom, alleging
that Nokia infringed two patents relating to the GPRS and/or EDGE mobile
devices. The proceedings seek an injunction against Nokia and claims damage
related to phones already sold.
QUALCOMM is also struggling to renegotiate a licensing contract with Nokia,
related to code division multiple access technology, which is licensed to Nokia
and other cell phone makers. The license agreement would partially expire on
April 9, 2007.
Unless the existing agreement is extended or a new agreement is concluded,
Nokia's right to sell subscriber products under most of Qualcomm's patents and
pay royalties to Qualcomm would cease. Likewise, Qualcomm's rights to sell
integrated circuits under Nokia's patents would also cease.
QCOM closed Thursday's regular trade up $0.63 at $36.36. However in the
after-hours, the stock lost $0.22 and was at $36.14 on a volume of 21.31 million
shares.
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