Qualcomm on Wednesday forecast fourth-quarter sales below market expectations and said it may cut jobs as consumer spending on products such as smartphones remains weak amid slowing global economic growth.
The San Diego, California-based company said it does not expect further sales to Chinese telecom giant Huawei (HWT.UL) because it does not have a license to sell 5G chips to Huawei. More broadly, in China, a slower-than-expected economic recovery has put pressure on Qualcomm’s orders. Smartphone shipments in the world’s second-largest economy fell 5% in the second quarter, according to Canalys.
Qualcomm said its forecast also takes into account the impact of macroeconomic headwinds, weak global phone sales and the fact that phone makers are using existing inventory rather than putting in new chip orders.
On a conference call with investors, Chief Financial Officer Akash Palkhiwala said Qualcomm’s forecast for the rest of the year assumes no “material revenue” from Huawei.
“As you know, we have a 4G license to supply to Huawei. We do not have a 5G license and we do not assume any material revenue will be generated in the future,” Palkhiwala said.
The company forecast fourth-quarter revenue of $8.1 billion to $8.9 billion (approximately Rs. 66,978 crore), while analysts polled by Refinitiv expected $8.7 billion (approximately Rs. 71,949 crore). Qualcomm expects the midpoint of its fourth-quarter adjusted profit range to be $1.90 (roughly Rs. 157), in line with analysts’ consensus estimate of $1.91 (roughly Rs. 158) per share, according to Refinitiv data.
Qualcomm warned that it may incur restructuring charges due to layoffs.
“While we are developing plans, we currently expect these actions to consist primarily of layoffs, and in connection with any such actions, we expect to incur significant additional restructuring charges,” the company said in a securities filing.
Qualcomm shares fell about 7% in continued choppy trading.
At a conference in May, Qualcomm CEO Cristiano Amon said he had yet to see signs of healthy consumption in China and that a recovery in the smartphone industry would “take several quarters.”
Qualcomm rival MediaTek warned last week that phone makers were “cautious” about buying chips due to tepid end-user demand.
Qualcomm said on Wednesday it expected phone makers’ use of existing inventory “to be a factor by the end of the year.”
Qualcomm shares fell amid a broad sell-off in technology and chip stocks, sending the Philadelphia SE Semiconductor Index down 3.5%. Analysts expect Apple to report its biggest fiscal third-quarter revenue decline since 2016 later this week as iPhone sales slow in the United States and elsewhere.
But other chip companies are seeing different results. Qorvo, which also supplies wireless chips to smartphone makers, beat analysts’ forecasts and Chief Executive Bob Bruggeworth said the company had taken a break from Apple, its “biggest customer.” “More business was won there, and the company’s shares rose 4% in after-hours trading. apple. NXP reported better-than-expected results last week, in part due to strong orders from Apple.
CEO Amon said the company will supply modem chips for Apple’s next-generation iPhone.
Kinngai Chan, an analyst at Summit Insights Group, said Huawei is not a big customer of Qualcomm and that the U.S. company’s stock price fell because its prospects were “much weaker than expected” when sales of Android phones were flat.
In the third quarter, revenue from Qualcomm’s main mobile phone chip business fell 25% to $5.26 billion (approximately Rs. 15,843,489 crore). Adjusted total revenue was US$8.44 billion (approximately Rs. 69,788 crore), below expectations of US$8.5 billion (approximately Rs. 70,284 crore).
The company expects fourth-quarter adjusted earnings per share of $1.80 (approximately Rs. 148) and $2 (approximately Rs. 165), compared with expectations of $1.91 (approximately Rs. 158).
The automotive industry has been a bright spot as Qualcomm looks to diversify beyond smartphone chips. The industry’s revenue grew 13% due to the increasing use of computer chips in vehicles.
© Thomson Reuters 2023
Svlook
