Qualcomm shares rise on upbeat revenue forecast

Shares of Qualcomm Inc, the biggest smartphone chipmaker, surged late in trading on Wednesday after reporting strong sales guidance for this quarter, buoyed by its expansion into new markets.

Revenue would hit $10.5 billion to $11.3 billion in the fiscal third quarter, Qualcomm said Wednesday. This compares to the average analyst estimate of US$9.97 billion. Earnings would be US$2.75 to US$2.95 per share, well above the average projection of US$2.60.

Qualcomm’s core product is the processor that powers many smartphones around the world, and another of its chips connects Apple Inc’s iPhone to high-speed data networks. This makes it particularly vulnerable to fluctuations in demand for such devices.

Photo: Reuters

However, under CEO Cristiano Amon, the company is trying to turn those skills into a growing presence in vehicles, networks and computers.

“We can no longer be defined as a communications company serving a single industry,” he said in a call with analysts.

Qualcomm shares rose 7.3% in extended trading after the announcement. They closed at US$135.10 in New York on Wednesday.

Analysts pointed to slowing demand for Android phones in China, the biggest market, as a threat to growth, but Qualcomm’s phone chip sales were stronger than expected last quarter. They amounted to $6.33 billion, compared to an estimate of $5.99 billion.

The company predicted its handsets division would grow more than 50% this fiscal year, buoyed by Samsung Electronics Co’s flagship Galaxy phone and gains at some Chinese smartphone makers.

The executives said there is evidence of weak demand for cheaper phones, but that wouldn’t hurt Qualcomm’s revenue because it’s not a big part of its business.

Revenue from the Internet of Things – efforts to add computing power to a wider range of devices and devices – totaled $1.7 billion. This compares to an average projection of US$1.6 billion.

Growing use of its chips in industrial machinery is also driving growth, Qualcomm said. The company’s automotive unit, which posted sales of $339 million, was up 41% from a year earlier.

It has a “design-win pipeline” that would account for more than $16 billion in sales, Qualcomm said.

Excluding certain items, fiscal second-quarter earnings were $3.21 per share, versus analysts’ average estimate of $2.93.

The company generated $11.2 billion in revenue, beating forecasts of $10.6 billion.

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