Qualcomm Gets Boost From 5G Smartphone Sales, Licensing Payments -- Update
November 04 2020 - 6:12PM
Dow Jones News
By Asa Fitch
Mobile-phone chip-making giant Qualcomm Inc. expects a surge in
smartphones sales next year as consumers flock to 5G-capable
devices such as Apple Inc.'s new iPhone 12 that helped lift its
latest results.
Qualcomm, a leading supplier of the chips powering 5G equipment,
is projecting shipments of 450 million to 550 million 5G
smartphones in 2021, at least double the expected total this
year.
Handset sales were the big driver of the company's earnings in
the latest quarter, Chief Executive Steve Mollenkopf said, adding
that Qualcomm also is seeing benefits from other kinds of devices
using its 5G chips. They included internet-of-things devices and
networking gear, he told analysts Wednesday.
"I would argue Covid has convinced people that these
technologies are now even more important than they thought they
were," he said.
Telecommunications providers and analysts are betting that
Apple's launch last month of several 5G-capable phones will give a
boost to demand for such services. "Until now, most people have
taken a wait-and-see approach to 5G. They've been waiting for 5G to
get real," Verizon Communications Inc. CEO Hans Vestberg said at
Apple's virtual launch event, adding the iPhone 12 "the wait is
over."
Qualcomm is expected to be a major beneficiary of Apple's 5G
phones. Mr. Mollenkopf said the company's sales for the quarter
ended in September reflected some of that business but would be
more substantial in later quarters.
The company generated $8.3 billion in revenue in the last
quarter, a 73% jump from a year earlier. The figure included a
one-time payment of $1.8 billion from a prior licensing settlement
with Chinese phone giant Huawei Technologies Co.
Even stripping out the Huawei agreement, sales rose 35% from the
prior year. The sale of the newest 5G smartphones have been a
bright spot for handset makers in a market that otherwise has been
lackluster since the pandemic hit.
Qualcomm posted $2.58 in earnings per share for the most recent
quarter, more than quadrupling the year-ago figure because of the
Huawei payment. Earnings were also up when excluding that
payment.
The results came in above Wall Street expectations. Analysts
expected $5.9 billion in sales excluding the Huawei payment and
per-share earnings of $2.23, according to a FactSet survey.
The San Diego-based company's shares rose more than 10% in
after-hours trading Wednesday.
The strong earnings come as Qualcomm emerges from several years
of legal challenges over how it licenses patents on key
telecommunications technologies, which some competitors and
regulators have called unfair. Apple and the Federal Trade
Commission both sued Qualcomm in 2017, alleging it leveraged its
position as a crucial chip supplier to get more favorable terms on
its licenses.
Apple and Qualcomm reached a settlement of their dispute last
April, while the company has all but won its FTC case. A federal
appeals court last month declined to revisit a ruling in Qualcomm's
favor, leaving an appeal to the Supreme Court as the FTC's only
recourse.
Anticipated demand for 5G products is contributing to a wave of
acquisitions reshaping America's chip industry. Marvell Technology
Group Ltd. last month said it would buy Inphi Corp., in part for
its 5G activities. It is the latest in a series of blockbuster
deals this year that also has seen Nvidia Corp. and Advanced Micro
Devices Inc. propose big acquisitions. Intel Corp. Chief Executive
Bob Swan said last month the company may use some of the funds from
the sale of its flash-memory manufacturing business to South
Korea's SK Hynix Inc. to invest in 5G.
Qualcomm forecast per-share earnings of $1.67 to $1.87 on sales
of $7.8 billion to $8.6 billion for the current quarter -- also
beating Wall Street's projections.
Write to Asa Fitch at asa.fitch@wsj.com
(END) Dow Jones Newswires
November 04, 2020 17:57 ET (22:57 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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