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Qualcomm logs robust Q2 sales, reveals licensing deals

Posted: 25 Apr 2016 ?? ?Print Version ?Bookmark and Share

Keywords:Qualcomm? WCDMA? LTE? 4G? LG Electronics?

Qualcomm Inc. has announced quarterly sales and profit that exceeded Wall Street's expectations and has resolved a dispute with LG Electronics Inc. over licensing terms. The fabless chip company said its fiscal Q2 was also enhanced by new license agreements in China such as a deal with Hisense Group Co. Ltd. The company also credited stronger-than-expected performance across its chipset business.

"We had a stronger than expected quarter and are executing well on our efforts to position the company for the next phase of profitable growth," said Steve Mollenkopf, Qualcomm's CEO.

According to Patrick Moorhead, president and principal analyst at Moore Insights and Strategy, Qualcomm made good progress on a key challenge for the company: securing royalties for its technology in South Korea and in China.

"They [Qualcomm] knocked out the big one in Korea with LG and knocked out the big one in China with Highsense," Moorhead said. "The scenario in China is that there are people selling smartphones that aren't paying Qualcomm royalties. It was good for them to knock out that big one."

But Moorhead added that there is still work to be done to compel other firms in China to pay Qualcomm royalties on its technology.

Steve Mollenkopf

Figure 1: Mollenkopf: We had a stronger than expected quarter.

On the conference call, Mollenkopf said, "We are making good progress on the licensing side in China, and this remains a key focus area for the company."

Qualcomm reported sales for its fiscal Q2 of $5.6 billion, down four per cent from the previous quarter and down 19 per cent compared to Q2 of fiscal 2015. For the fiscal Q2, which ended March 27, Qualcomm reported a net income of $1.2 billion, or 78 cents per share, a decrease of 19 per cent compared with the previous quarter but an increase of 11 per cent compared with the year ago quarter.

Qualcomm's sales for the quarter beat consensus analysts' expectations, which called for revenue of about $5.3 billion. The company's pro forma earnings per share, $1.40, also exceeded analysts' expectations.

For the current quarter, which ends in June, Qualcomm said it expects sales to be between $5.2 billion and $6 billion, compared with $5.5 billion for the Q3 of fiscal 2015.

"On the whole it was a very strong report," said Moorhead. He speculated that the decline in Qualcomm's stock price following the report was largely due to what he called a conservative Q3 outlook.

As a result of the resolution of the dispute with LG, which was resolved through arbitration, Qualcomm said it would recognise in the fiscal Q3 about $200 million revenue from sales to LG over the past few quarters.

Terms of the resolution were not disclosed. Qualcomm described the resolution as favourable and said it would not result in any change to revenue that was previously recognised by the company for prior quarters.

The deal with Hisense, a government-backed multinational electronics conglomerate, grants Hisense a royalty-bearing patent license to develop manufacture and sell 3G WCDMA and CDMA2000 and 4G LTE terminals for use in China. The royalties payable by Hisense are consistent with the terms of the rectification plan submitted by Qualcomm to China's National Development and Reform Commission, Qualcomm said.

- Dylan McGrath
??EE Times

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