Qualcomm Outlook Weighed Down by Smartphone Demand

Qualcomm gave a downbeat fourth-quarter sales forecast, indicating lingering weakness in smartphone demand while consumers wait for 5G devices, according to Bloomberg.

Fiscal fourth-quarter revenue will be $4.3 billion to $5.1 billion, the company said in a statement. That compares with an average of analysts’ estimates of $5.72 billion, according to data compiled by Bloomberg. The forecast projects a decline in sales of 12% to 26% from the period a year earlier.

Net income in the previous quarter rose to $2.1 billion, or $1.75 a share, in the fiscal third quarter, from $1.2 billion, or 81 cents, a year earlier. Earnings were boosted by a one-time payment from Apple to settle their dispute and the resumption of royalty payments. Excluding certain items, profit was 80 cents, compared with an average estimate of 76 cents. Adjusted revenue declined to $4.9 billion from $5.6 billion a year earlier. Analysts on average had predicted $5.1 billion in sales.

Phone makers have largely given up on releasing new high-end phones based on current technology and consumers are delaying their purchases until the debut of 5G, CEO Steve Mollenkopf said. That’s making the near-term outlook for phones look “soft“ but that’s only a temporary phenomenon ahead of the surge in demand for new devices, he said. “They’ve all cut and run toward 5G,“ he said in a phone interview.

The chipmaker is also still struggling to work through legal challenges that threaten its right to charge royalties on the technology for all phones used on modern networks. Qualcomm’s licensing customers are nonetheless continuing to pay it fees, Mollenkopf said. The chipmaker is still in dispute with Huawei over the terms of a new agreement. The Chinese company had been making partial payments, but those will stop as they try to finalize a deal, he said.

While Qualcomm settled its broad-ranging legal dispute with Apple, the company lost a U.S. Federal Trade Commission case that alleged unfair business practices. U.S. District Judge in California ordered Qualcomm to renegotiate patent licenses. Qualcomm is appealing the decision and seeking a stay on the decision so that it doesn’t have to immediately start those renegotiations.