Qualcomm Inc, the largest seller of semiconductors for mobile phones, fell in late trading on Wednesday after it forecast fiscal third-quarter profit that may miss some analysts’ estimates as average phone prices come under pressure.
Net income in the period that ends in June will be US$0.80 to US$0.88 a share, San Diego-based Qualcomm said in a statement on Wednesday.
Analysts on average had projected earnings of US$0.87, according to data compiled by Bloomberg.
The shares dropped as much as 7.1 percent.
Qualcomm’s results are seen as a proxy for growth in the handset industry because its technology and chips dominate in advanced models with Internet access.
Average selling prices (ASPs) for phones may not reach the high end of the company’s earlier targets as more sales come from markets where consumers favor cheaper devices.
The company’s stock fell as low as US$61.33 after the report and closed at US$66 on Wednesday in New York.
For the year, Qualcomm predicted ASPs as high as US$224 per phone. That is lower than earlier company predictions that prices might be as much as US$226 per phone.
Revenue in the third quarter will rise to US$5.8 billion to US$6.3 billion, Qualcomm said, compared with an average analyst prediction of US$5.88 billion.
ASPs will increase from the second quarter as new, more expensive phones come to market, Qualcomm said.
Net income in the second quarter, which ended on March 31, fell 16 percent to US$1.87 billion, or US$1.06 a share, from US$2.23 billion, or US$1.28, a year earlier. Sales increased 24 percent to US$6.12 billion.
Analysts on average had predicted earnings of US$1.03 a share on sales of US$6.09 billion.
While growth in emerging markets such as China is helping Qualcomm’s sales, gains are coming in lower-priced chips, a trend that is hurting profitability. Revenue in its chip business rose 28 percent from a year ago to US$3.92 billion in the second quarter.
Operating margin at that division narrowed to 17 percent from 26 percent in the prior three months.
“If you look at the emerging regions, they are becoming a much more significant portion,” Qualcomm chief executive officer Paul Jacobs said in a telephone interview. “China was a big strength for us.”
The majority of Qualcomm’s revenue comes from baseband chips, which connect phones to cellular networks and are sold to wireless-device makers such as Apple Inc and Samsung Electronics Co.
Most of the company’s profit comes from the licensing of so-called code division multiple access (CDMA) technology, a radio-communications standard used in handsets and phone systems.
Even phones that do not use its chips generate royalties for Qualcomm if they are compatible with networks that use the CDMA standard.
The company has gained market share in semiconductors by being the first to sell modem chips that support the long-term evolution (LTE) standard, which provides the fastest download speeds.
Qualcomm has a market share of more than 90 percent in LTE, researcher Forward Concepts said.