Strong demand from China buoys Qualcomm forecast

By Rishika Sadam

(Reuters) – Qualcomm Inc forecast current-quarter profit largely above market estimates as it sees strong demand for its mobile chips in China and expects to sign more licensing deals.

Shares of the company, which also posted a better-than-expected third-quarter profit, rose about 7 percent in extended trading on Wednesday.

“We are seeing incremental demand for our lower-tier chip sets in China versus our prior expectations,” Chief Executive Steve Mollenkopf said on a call with analysts.

The company, whose chips are used in Apple Inc and Samsung Electronics Co Ltd smartphones, is focusing on its flagship mobile processors to regain the market share.

Qualcomm expects to launch Snapdragon 821, an advanced and a faster version of Snapdragon 820, which powers Samsung Galaxy S7 and S7 edge smartphones.

“I think it is pretty straightforward…Samsung is back as their customer and…more people in China are ready to pay to license their technology…so it looks like the company is well positioned for the coming quarters,” said Patrick Moorhead, an analyst with Moor Insights & Strategy.

The company said it expects fiscal year revenue in its high-margin licensing business to be between $7.4 billion and $7.8 billion.

The chipmaker’s next big bet is the fast next-generation 5G technology, a wireless service that is expected to be 100 times faster than the current 4G networks.

The company said it now expects to gain traction in the 5G technology by 2018-2019.

U.S. regulators last week paved way to open spectrum for the 5G wireless service.

The San Diego-based chipmaker said it expected to earn $1.05 to $1.15 per share in the fourth quarter, compared with analysts’ average estimate of $1.08, according to Thomson Reuters I/B/E/S.

The company also forecast revenue between $5.4 billion and $6.2 billion. Analysts were expecting about $5.73 billion.

The company, which has been struggling with slowing smartphone sales and stiff competition from Chinese and Taiwanese rivals, reported its first revenue rise in five quarters.

Revenue rose to $6.04 billion quarter ended June 26 from $5.83 billion a year earlier.

Excluding items, the company earned $1.16 cents per share, compared with analysts estimate of 97 cents.

Net Income attributable to Qualcomm rose to $1.44 billion, or 97 cents per share, from $1.18 billion, or 73 cents per share. http://bit.ly/29Pflgm

(Reporting by Rishika Sadam in Bengaluru; Editing by Don Sebastian)