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News > Technology
Qualcomm meets, warns
April 25, 2001: 6:26 p.m. ET

Wireless technology specialist hits 2Q targets, lowers forecasts
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NEW YORK (CNNfn) - Wireless communications technology specialist Qualcomm on Wednesday logged fiscal second-quarter financial results that met expectations but warned that slackening demand for wireless handsets will take a bite out of its bottom line in the current quarter and remainder of the fiscal year.

During the quarter ended April 1, Qualcomm said its operating profit was 29 cents per share. That matched the consensus earnings estimate of analysts polled by First Call and compares with a profit of 26 cents per share during the year-ago quarter.

Qualcomm's second-quarter revenue totaled $713 million, up 9.8 percent from $649 million during the same period last year.

Shares of Qualcomm (QCOM: Research, Estimates) rose $3.48 to $62.98 on Nasdaq ahead of the earnings news, which was released after the closing bell. They tumbled $7.88 to $55.10 in extended-hours trade.

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Qualcomm is the creator of a wireless communications technology called Code Division Multiple Access, or CDMA, a standard which is used in mobile phones, wireless telecom equipment and satellite ground stations primarily in North America. The company makes and sells mobile-phone chipsets based on CDMA. It also licenses the technology to other mobile-phone and wireless-telecom equipment makers.

During the quarter, Qualcomm said it shipped 16 million wireless chipsets, but warned that shipments will drop in the current quarter to about 14 million. The company also said it expects its revenue from royalties and licensing to fall in the current quarter.

"Global economic uncertainties have slowed the growth we were previously expecting, causing us to lower our expectations for CDMA handset sales to approximately 80 million units in 2001 versus the 90 million units on which we had previously planned," Irwin Jacobs, the company's chairman and CEO, said in a teleconference with analysts Wednesday evening.

As a result, Jacobs said Qualcomm now expects operating profit in the current quarter to be about 21 cents per share. Analysts most recently had expected the company's bottom line for the quarter, which ends in June, to be close to 33 cents per share, according to the First Call survey.

For the fiscal year ending in September, Jacobs said Qualcomm's operating earnings will be roughly $1.05 per share. That compares with the Street's most recent consensus estimate for a profit nearer $1.26 per share.

When they reported fiscal first-quarter results in late January, Qualcomm executives had said they remained comfortable with the Street's full-year profit expectations.

Qualcomm also said Wednesday it expects to proceed with the previously announced spin-off of its semiconductor business, referred to as "Qualcomm Spinco" by the fall of 2001 in the form of a 100 percent tax-free distribution of common stock to Qualcomm shareholders.

The company said it has enough cash to fund the new company and does not plan an initial public offering of Spinco stock prior to the spin-off.

Eyeing profit, revenue growth in 2002

Qualcomm's CDMA standard competes mainly against one called Time Division Multiple Access, or variations of it which are known as Global System for Mobile Communications, or GSM. That standard is widely used for wireless networks in Europe.

The company has been aggressively pushing the CDMA standard in Asia and other emerging market. During the second quarter, the company signed a CDMA infrastructure license agreement in China with ZTE, one of the leading manufacturers designated by China's Ministry of Information Industry to support CDMA deployment.

Qualcomm also has been pushing the standard in other emerging markets including Australia and South America.

Click here to check out wireless stocks

The company's research and development expenses during the second quarter totaled $105 million, compared with $72 million in the year ago period. Executives said its investments in R&D were primarily associated with new-product development for next-generation CDMA products.

"Based on preliminary estimates, we expect strong revenue and earnings growth for fiscal 2002," Jacobs said.

He said the primary drivers for this growth include the commercialization of a high-speed wireless technology called CDMA200, growing CDMA deployments worldwide in new markets including China and India; and the introduction of a technology which it says will substantially lower the cost, size and power requirements of CDMA devices.

"We believe that the availability of a wide variety of products and wireless data applications is critical for growing the worldwide market for CDMA," Jacobs said.

Including one-time charges, Qualcomm reported a fiscal second-quarter net profit of $149.1 million, or 18 cents per share. That compares with a net profit of $206.8 million, or 26 cents per share, during the same quarter a year ago. graphic





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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.