Qualcomm Misses on Q4 Earnings

Zacks

Qualcomm Inc. (QCOM) reported mixed financial results for the fourth quarter of fiscal 2013. Moreover, management provided a disappointing financial outlook. As a result, in the aftermarket trade on Nasdaq, the stock price of the company was down by $2.82 (4.04%) to $66.92.

Qualcomm is facing intense competition from Intel Corp. (INTC), which has been modifying its chipsets to suit the modern mobile computing market. Competition is also likely to emanate from formidable rivals like Broadcom Corp. (BRCM) and NVIDIA Corp. (NVDA). Qualcomm currently has a Zacks Rank #2 (Buy). 

Net Income

On a GAAP basis, quarterly net income from continuing operations was $1,501 million or 86 cents per share compared with $1,271 million or 72 cents per share in the year-ago quarter. In the fourth quarter of fiscal 2013, adjusted (excluding special items) earnings per share came in at 91 cents, significantly below the Zacks Consensus Estimate of 96 cents.

Revenue

Quarterly total revenue of $6,480 million was up 33% year over year, surpassing the Zacks Consensus Estimate of $6,354 million. Segment wise, Qualcomm CDMA Technologies businesses contributed $4,457 million of revenues in the fourth quarter, up 42% over the prior-year quarter. Quarterly EBT margin was 16%.

Qualcomm Technology Licensing generated $1,874 million in revenues, up 19% year over year. Quarterly EBT margin was 87%. Qualcomm Wireless & Internet segment generated $154 million, down 4% year over year and EBT margin was 8%.

Chipset Statistics

During the fourth quarter of fiscal 2013, Qualcomm shipped approximately 190 million CDMA-based MSM chipsets, up 35% year over year. This figure was far better than the company’s guidance of a mid-point of 176 million. Average selling price (ASP) of a mobile handset with an in-built Qualcomm chipset during this quarter was around $227 -$233.

Operating Metrics

Quarterly operating income was $1,588 million compared with $1,235 million in the year-ago quarter. Gross margin was 58.1% compared with 62.2% in the year-ago quarter. Quarterly operating margin was 24.5% compared with 25.4% in the prior-year quarter. In the reported quarter, the company returned $592 million (35 cents per share) to its shareholders in the form of cash dividends and another $3.32 billion through buyback of 50.7 million shares of common stock.

Cash Flow

During the fourth quarter of fiscal 2013, Qualcomm generated $2,523 million of cash from operations compared with $1,409 million in the prior-year quarter. Free cash flow, in the reported quarter, was $2,323 million against $1,159 million in the year-ago quarter.

Liquidity

At the end of fiscal 2013, Qualcomm had $29,406 million of cash and marketable securities and no outstanding debt on its balance sheet compared with $26,837 million of cash and marketable securities and no outstanding debt at the end of fiscal 2012.

First Quarter of Fiscal 2014 Financial Guidance

The first-quarter revenues are expected in the range of $6.3 billion - $6.9 billion. Its mid-point of $6.6 billion is well below the current Zacks Consensus Estimate of $6,944 billion. GAAP earnings per share are projected to be 92 cents – $1.02.

Non-GAAP earnings per share are likely to range between 97 cents - $1.07 including 13 cents per share of stock-based compensation expense. Its mid-point of $1.02 is significantly below the current Zacks Consensus Estimate of $1.17. Qualcomm is expected to ship 195 million – 210 million MSM chipsets in the first quarter of fiscal 2014.

Fiscal 2014 Financial Guidance

The fiscal 2014 revenues are expected within the range of $26 billion - $27.5 billion. Its mid-point of $26.75 billion is well below the current Zacks Consensus Estimate of $27.62 billion. GAAP earnings per share are likely to be between $4.25 - $4.45.

Non-GAAP earnings per share are expected in the band of $4.44 - $4.64 including 51 cents per share of stock-based compensation expense. However, its mid-point of $4.54 is higher than the current Zacks Consensus Estimate of $4.45. ASP of mobile handset with an in-built Qualcomm chipset during fiscal 2014 will be around $216-$230.

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