QCOM QUALCOMM Inc

By Don Clark and Tess Stynes 

Qualcomm Inc. said its earnings fell 24% in the most recent quarter, the latest sign that slowing sales of high-end smartphones from Apple Inc. and others are hurting component suppliers.

The San Diego-based chip maker, which also has been facing headwinds in its patent-licensing business, on Wednesday issued a forecast for the current quarter that fell short of some Wall Street expectations.

But Qualcomm executives stressed that earnings and revenue for the fiscal first quarter ended in December were above its own recent projections.

"We delivered a better quarter than we said we were going to deliver," said CEO Steve Mollenkopf in an interview.

In another development, Qualcomm disclosed Wednesday that LG Electronics Inc. contends that it paid the chip maker too much under its patent licensing deal and seeks compensation through an arbitration proceeding. Qualcomm said it believes LG's claims are without merit but added that it is deferring recognition of licensing revenue from the South Korean company for the moment.

Qualcomm, the biggest maker of processors and modem chips used in mobile phones, gets more than half of its profit from royalty payments by handset makers to use its cellular patents. Its licensing practices have prompted antitrust probes in South Korea, Taiwan and the U.S., while European authorities have been investigating its chip sales tactics.

Qualcomm has insisted that its practices are legal and it is cooperating with investigators.

The company has grappled with other issues in the past year, include pressure from activist Jana Partners LLC to consider options that included dividing the chip business from the patent-licensing business. The company ordered a major cost-cutting program but in December ruled out a breakup.

Qualcomm also faces weaker demand for high-end phones from the likes of Apple and Samsung Electronics Inc. Apple on Tuesday reported that iPhone sales grew at their slowest pace since it introduced the device in 2007. Apple forecast that revenue in the current quarter will decline for the first time in 13 years, signaling an end to its recent period of hypergrowth.

Adding to the pressures on Qualcomm, Samsung and some other handset makers in 2015 shied away from using the chip maker's flagship Snapdragon processor. Mr. Mollenkopf said he was pleased with demand for the latest version of that product line, the Snapdragon 820, with more than 100 devices in development or already using the chip.

Much of Qualcomm's fortune lately has been tied to smartphone demand in China, the biggest market for those devices. Mr. Mollenkopf said sales of premium phones are "a bit softer" there. "But we are continuing to see unit growth," he said.

Still, Qualcomm's total chip sales are running below prior levels. The company projected chip shipments of 175 million to 195 million in the second quarter ending in March, down as much 25% from the 233 million reported for the year-earlier period.

For the quarter ended Dec. 27, Qualcomm reported 242 million chip shipments, compared with its estimates of between 225 million and 245 million.

Net income totaled $1.5 billion, or 99 cents a share, up from $1.97 billion, or $1.17 a share, a year earlier. On an adjusted basis that excludes asset-sale gains and other one-time items, per-share earnings fell to 97 cents from $1.34 a year ago. Revenue decreased 19% to $5.78 billion.

Qualcomm previously had projected adjusted per-share profit of 80 cents to 90 cents and revenue of $5.2 billion to $6 billion.

For the three-month period ending in March, Qualcomm forecast per-share earnings of 90 cents to $1 and revenue of $4.9 billion to $5.7 billion. Analysts polled by Thomson Reuters expected per-share profit of $1.01 and revenue of $5.68 billion.

Write to Don Clark at don.clark@wsj.com and Tess Stynes at tess.stynes@wsj.com

(END) Dow Jones Newswires

January 27, 2016 19:02 ET (00:02 GMT)

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