Qualcomm Inc (QCOM)

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Qualcomm forecasts sales above Wall Street estimates on 5G, connected devices strength
By: Stephen Nellis | July 28, 2021

(Reuters) -Qualcomm Inc on Wednesday forecasted fiscal fourth quarter revenue higher than Wall Street expectations thanks to sales of 5G phones, including Apple Inc's iPhones, and a growing portfolio of other chips.

The San Diego, California-based company is the biggest supplier of mobile phone chips in the world and the leader in 5G technology, supplying modem chips that help iPhones connect to wireless data networks and the modems and central processors for much of the Android market.

Shares rose 2.1% in after-market trading following the results, which could alleviate some concerns among investors about the impact of a global chip shortage on the smart phone market, including the iPhone.

The company is also benefiting from the exit from the global smartphone market of China's Huawei Technologies Co Ltd. Huawei's flagship models did not use Qualcomm chips but its rivals, who are now snapping up market share, mostly do.

Qualcomm has also been working to boost sales of other chips, such as radio-frequency chips that augment its 5G phone chips and whose sales have doubled in the past year. Sales are also growing for a variety of chips for cars and for "internet of things," or IoT, applications.

In a statement, Qualcomm's Chief Executive Cristiano Amon said sales of those non-mobile chips were expected hit $10 billion this year.

“Our solutions are fueling the connected intelligent edge that is enabling the cloud economy, and we are seeing unprecedented demand for our technologies as the pace of digital transformation accelerates," Amon said.

The expanded menu of offerings helped boost Qualcomm's chip revenue forecast, which had a midpoint of $7.25 billion for the current fiscal fourth quarter, compared with analyst estimates of $6.83 billion, according to Refinitiv data.

Some analysts believe a global chip shortage has held back Qualcomm's sales. Qualcomm executives have said their own supply chain bottlenecks are easing, but some of Qualcomm's customers cannot find all the other chips they need to make full devices. Apple on Tuesday predicted slowing revenue growth and that the chip shortage would start to hit its iPhone in its current fiscal fourth quarter.

Some of Qualcomm's fourth-quarter sales are likely to reflect Apple's plan to ramp up production of a product line to be launched this fall. On Wednesday, Qualcomm maintained its previous forecast of 450 million to 550 million 5G handsets globally, including iPhone and Android devices, and added its forecast now has an "upward bias," meaning it expects the final figures to come in at the higher end of the range.

Qualcomm forecast overall sales and adjusted profits with midpoints of $8.8 billion and $2.25 per share, above estimates of $8.50 billion and $2.04 per share, according to Refinitiv data.

The company predicted revenue with a midpoint of $1.55 billion from its patent licensing business, compared with analyst expectations of $1.56 billion, according to Refinitiv data.

For the fiscal third quarter ended June 27, Qualcomm said overall adjusted revenues and adjusted profits were $8 billion and $1.92 per share, higher than estimates of $7.58 billion and $1.68 per share, according to Refinitiv data.

Mobile handset chips remain Qualcomm's biggest seller, increasing 57% to hit $3.86 billion in the quarter.

"Qualcomm has done a phenomenal job in driving the 5G ecosystem. For sure it’s moving a lot faster than 4G," said Paolo Pescatore, an analyst at PP Foresight.

But sales of other chips have been expanding, with radio frequency chips and IoT chips reaching sales of $957 million and $1.4 billion, up 114% and 83% from a year earlier, respectively.

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