Qualcomm Profit Falls On Costs, Yet Tops Street

(RTTNews) - Mobile chip maker Qualcomm Inc. (QCOM), Wednesday reported a marginal decline in first-quarter profit as shoddy margins offset a ten percent growth in revenues. However, quarterly earnings easily topped Wall Street estimates, while revenues missed expectations.

The company detailed a weak outlook for the second quarter, but lifted its earnings expectations for the full year 2014. Qualcomm shares were up a near 3 percent in after-hours trade on the Nasdaq.

Qualcomm provides baseband chips that connect phones to cellular networks. It has made significant gains from the burgeoning demand for smartphones made by companies such as Apple Inc. (AAPL) and Samsung Electronics Co. Qualcomm also gets revenue from the license of its technology. But as customers opt for cheaper phones, it can dent the margins of chip makers like Qualcomm.

For the first quarter, San Diego, California-based Qualcomm posted net income of $1.88 billion, down 2 percent from $1.91 billion last year. On a per share basis, earnings remained unchanged at $1.09 per share.

Results for the quarter include a $665 million gain from discontinued operations related to the substantive sale of its Omnitracs division, and a $444 million impairment charge.

Excluding items, adjusted earnings for the quarter were $2.16 billion or $1.26 per share. On average, 11 analysts polled by Thomson Reuters expected earnings of $1.18 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues for the quarter climbed to $6.62 billion from $6.02 billion in the prior year. Ten analysts had a consensus revenue estimate of $6.67 billion for the quarter.

Among segments, Qualcomm CDMA Technologies (QCT) revenue grew 12 percent to $4.6 billion year-over-year, and Qualcomm Technology Licensing (QTL) was up 8 percent to $1.9 billion.

Qualcomm shipped 213 million modem chips in the quarter, up 17 percent from last year.

Results were largely offset by operating expenses that increased to $5.1 billion from $3.9 billion a year ago.

For the second quarter, Qualcomm projects net earnings of $0.99 to $1.09 per share, adjusted earnings of $1.15 to $1.25 per share and revenues of $6.1 billion to $6.7 billion. Analysts currently expect earnings of $1.26 per share for the quarter, on revenues of $6.72 billion.

For fiscal 2014, Qualcomm has now forecast net earnings of $4.33 to $4.53 per share and adjusted earnings of $5.00 to $5.20 per share. Earlier, it the company estimated net earnings of $4.25 to $4.45 per share and adjusted earnings of $4.95 to $5.15 per share. The company still expect revenues of $26 billion to $27.5 billion for the year.

Analysts currently expect earnings of $5.09 per share on revenues of $27.06 billion for 2014.

Earlier this month, Qualcomm acquired a patent portfolio from Hewlett-Packard Co. (HPQ), Hewlett-Packard Development Co LP and Palm Inc. The deal diversifies Qualcomm's mobile patent portfolio.

Qualcomm stock closed Wednesday at $71.12, down $0.87 or 1.21%, on a volume of 14 million shares. In after hours, the stock gained $2.03 or 2.85% at $73.15. In the past year, the stock has traded in the range of $59.02 - $75.90.