Fri, Aug 02, 2019 page10

• Qualcomm outlook clouded by Huawei gains

  • Reuters
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  Qualcomm Inc’s quarterly revenue and profit forecast fell short of Wall Street targets, driven by Huawei Technologies Co Ltd’s (華為) strong gains in the Chinese smartphone market, the US company said, sending its shares down as much as 6 percent.

  In an interview on Wednesday, Qualcomm chief executive Steve Mollenkopf said that Huawei had stolen market share mainly from its domestic rivals such as Xiaomi Corp (小米), Oppo Mobile Telecommunications Corp (歐珀) and Vivo Communication Technology Co (維沃) — all of which are major Qualcomm customers.

  Huawei’s advance has spurred other phone makers to cancel 4G models planned for the rest of this year and instead focus on 5G models for release early next year that could drive growth for Qualcomm, he added.

  

  A woman walks past a sign advertising Qualcomm Inc at Mobile World Congress in Shanghai, China, on June 28.

  Photo: Reuters

  “Huawei was very aggressive in terms of making sure they built their market share there because they couldn’t sell things internationally,” Mollenkopf said. “And the reaction of the [other Chinese phone makers] was: ‘Let’s go as fast as we can to 5G, because there’s a great opportunity there,’ even to the point of saying: ‘Let’s cancel 4G models.’”

  Mollenkopf said Qualcomm would not see benefits from that shift until early next year, but said 5G rollouts by carriers appeared to be on track, including in China where Huawei is also a major telecommunications gear supplier.

  Huawei’s effect on Qualcomm’s forecast underscores the extent to which the Chinese company has become more of a rival than a customer to the San Diego, California-based company.

  Huawei, which was the subject of US sales restrictions imposed in May, continues to buy a small number of Qualcomm chips.

  However, the firms, which are among the world’s largest holders of patents related to 5G technology, are in a protracted licensing dispute.

  Huawei had been making good-faith payments and negotiations have inched forward, but Mollenkopf said no further payments are included in Qualcomm’s fiscal fourth-quarter guidance.

  “The companies are talking and we’re focused on a final agreement, but we don’t have it yet,” he said.

  The US-China trade dispute and a slow smartphone market drove Qualcomm to lower its outlook for this year’s sales of smart devices to a range of 1.7 billion to 1.8 billion, down from a previous estimate of 1.8 billion to 1.9 billion, he said.

  The company’s modem chip shipments fell 22 percent to 156 million in the fiscal third quarter, missing analysts’ estimate of 160.1 million, according to FactSet.

  Apple Inc last week bought Intel’s modem business to help supply its own smartphone chips.

  Mollenkopf said the company had expected such a deal when negotiating its agreement with the iPhone maker, but Apple’s purchase had no effect on Qualcomm’s fourth-quarter outlook.

  “This was something everybody assumed,” Mollenkopf said. “And we protected ourselves and feel very good about continuing to be able to compete” for Apple’s business.

  Qualcomm forecast fourth-quarter revenue of US$4.3 billion to US$5.1 billion and profit of US$0.65 and US$0.75 per share, below estimates of US$5.63 billion and US$1.08 per share, according to IBES data from Refinitiv.

  Revenue for the third quarter ended June 30 was US$4.9 billion, missing analysts’ estimates of US$5.08 billion. That excluded a one-time payment from Apple for unpaid royalties while the two were in a legal dispute.

  Excluding items, Qualcomm earned US$0.80 per share, beating analysts’ average estimate of US$0.75.
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