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Qualcomm Leaves Out Huawei Business From Outlook, Shares Fall

Qualcomm Leaves Out Huawei Business From Outlook, Shares Fall
Following the United States based chip maker Qualcomm Inc. forecasting losing out on business with China’s Huawei Technologies Co. in the near future and after its reported non-settlement revenue missed the estimates of analysts at Wall Street, the shares of the company dropped in the extended session on Wednesday.
There was a 4.9 per cent drop in the shares of Qualcomm in after hours trading after falling by 2.2 per cent during the regular trading session and its share price closed at $73.16. in contrast, there was a 1.1 per cent drop in the S&P 500 index, 1.2 per cent in the tech-heavy Nasdaq Composite Index, and a 3.2 per cent fall in the PHLX Semiconductor Index.
“As a result of the export ban, Huawei shifted their emphasis to building market share in the domestic China market where we do not see the corresponding benefit in product or licensing revenue,” said Steve Mollenkopf, Qualcomm’s chief executive, on a post-earnings conference call.
For the fiscal fourth-quarter, market analysts expect Qualcomm to earnings report of $1.09 a share on revenue of $5.67 billion while the company forecast its adjusted fiscal fourth-quarter earnings at between 65 cents to 75 cents against revenue between $4.3 billion and $5.1 billion. A final agreement with Huawei is yet to be struck, Qualcomm said, and added that pending payments from the Chinese tech giant was not considered while making its outlook.
“In addition, our customers in the China market are working through their existing 4G inventory and de-emphasizing their second-half 2019 4G launches as they shift their priority to their 5G launches in early 2020,” Mollenkopf said. “As a result we do not expect the typical seasonal benefits given this unique market dynamics.”
“For the first calendar quarter of 2020, we anticipate reaching the inflection point as our financial results begin to reflect the benefits of our substantial efforts over the years to bring 5G to the market worldwide,” Mollenkopf said.
The fiscal third-quarter net income reported by Qualcomm came at $2.15 billion, or $1.75 a share, while in the same period a year ago, the company had reported net income of $1.2 billion, and 81 cents a share. The company’s adjusted earnings were 80 cents a share.
The company reported revenues of $9.64 billion during the quarter compared to revenue of $5.58 billion in the same period a year ago. The company reported adjusted revenue of $4.9 billion following less revenue received from Qualcomm’s settlement with Apple Inc.
According to a survey of analysts by FactSet, the company was expected to report earnings of 76 cents a share against total revenues of $5.09 billion.
So far this year, there has been a 29 per cent rise in the share price of Qualcomm, compared to a 19 per cent rise in the S&P 500, a 23 per cent increase in the Nasdaq and a 34 per cent growth in the SOX chip index.

Christopher J. Mitchell

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