Qualcomm CEO Sees Improving 3Q Chip
Sales, Handset Demand
By JOHNATHAN BURNS
NEW YORK -- Wireless technology developer Qualcomm Inc. (QCOM)
posted higher-than-expected second quarter earnings Tuesday and made
bullish predictions for the remainder of the year.
After the market close, Qualcomm, San Diego, reported pro forma
earnings per share of 26 cents on revenue of $727.7 million, beating
consensus estimates by two cents a share.
But forward-looking statements by Chief Executive Irwin Jacobs may be
what moves the stock tomorrow, as the company expects to ship more
than 14.5 million mobile phone chips worldwide in the coming quarter,
compared with 11 million in the just-ended second quarter.
"I think we will beat it by an interesting amount," Jacobs told Dow Jones
Newswires. "We haven't specified the number of chips we could be selling.
We are seeing quite a few orders."
Qualcomm exited the company's fiscal second quarter with a book-to-bill
ratio of greater than one. Since that time, the company has added even
more orders, although Jacobs wouldn't reveal the final ratio.
Book-to-bill ratios of more than one indicate swelling demand.
Jacobs said Qualcomm is comfortable with Wall Street's earnings
expectations for its third quarter, which are 27 cents a share, according to
First Call.
Jacobs said he is also comfortable with year-end earnings estimates of
$1.05 a share.
Second-quarter revenue was down from the first quarter due to seasonal
conditions and a backlog of inventory among handset providers. In the
prior year's second quarter, Qualcomm's revenue was $932.4 million. The
year-on-year decline reflects revenue lost when the company sold two
business units, including its handset-making business.
The company, which never showed good results in its handset unit, had
entered the business in hopes of stimulating demand for its CDMA
technology.
It worked.
Jacobs said he expects annual industry-wide CDMA handset sales in the
mid 60 million to low 70 million range by year-end.
"We're seeing a 40% increase going into the next year," he said. "These are
numbers based on inputs from others."
"Our earnings depend quite a bit on the number of phones sold during the
quarter," Jacobs said.
He expects the introduction of new chipsets to further stimulate demand, as
wireless service providers seek to increase revenue by offering customers
data and Internet access via mobile handsets.
Meanwhile, Jacobs said the company is moving forward in its attempts to
penetrate the Chinese market.
Qualcomm has inked a deal to supply the country's No. 2 wireless service
provider China Unicom with CDMA-based technology. Some have
speculated the Chinese government wants use the agreement as a tool to
help it enter the World Trade Organization.
"We are preparing for an increase in CDMA sales in China," Jacobs said.
"We are increasing our activities there."
Shares of Qualcomm, which ended the day down 4% to 112 3/16 on the
Nasdaq, traded as high as 120 in the after-hours market, according to
Instinet.
-Johnathan Burns; Dow Jones Newswires; 201-938-2020;
johnathan.burns@dowjones.com
Briefing Book for: QCOM |
