Qualcomm Inc, the biggest maker of smartphone processors, on Wednesday offered a far weaker forecast than expected due to an economic slowdown and COVID-19 lockdowns in China.
Revenue would be US$9.2 billion to US$10 billion in the fiscal first quarter, Qualcomm said.
That compares with an average estimate by analysts of US$12 billion.
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Excluding certain items, earnings per share would be US$2.45 at best, the company said.
The average projection was US$3.40.
Qualcomm is coping with the slowdown in part by freezing hiring, executives told a conference call.
The buildup of extra inventory might take two quarters to clear, the company said.
“The further deterioration of the macroeconomic environment and sustained COVID restrictions in China have led to broad-based demand weakening across tiers and regions,” Qualcomm said in a presentation to investors.
Qualcomm chief executive officer Cristiano Amon has said that his tenure would be defined by how successful he is in pushing the chipmaker’s technology into new areas, including automotive equipment, networking and computers.
While Qualcomm is getting more revenue from those newer efforts, the bulk of its sales still comes from phones, limiting the company’s overall growth.
Qualcomm’s main product is the processors that run many of the world’s smartphones. It also sells the modem chips that connect Apple Inc’s iPhone to high-speed data networks.
The phone market is predicted to contract in the low-double-digit percent range, and excess inventory would continue to be a drag on orders throughout the fiscal first quarter, Qualcomm said.
There is a silver lining, though.
The company would continue to provide the modem chips for the “vast majority” of iPhones next year, a turnabout for a company that had expected to lose the business to Apple’s homegrown components, comments that accompanied its earnings report said.
The statement said that Apple would not be moving to its own in-house modem design for next year’s models.
Qualcomm’s fiscal fourth-quarter revenue was US$11.4 billion, in line with estimates.
Profit in the period, which ended on Sept. 25, was US$3.13 per share, excluding some items. That also matched projections.
“While our financial outlook has been temporarily impacted by elevated channel inventory, our diversification strategy and long-term opportunities remain unchanged,” Amon said in a prepared statement.
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