Qualcomm Disappoints in Latest Quarterly Report

Wall Street wasn’t too thrilled with chipmaker Qualcomm’s third quarter financial results this week, which missed on both revenue and guidance.

According to CEO Steve Mollenkopf, Huawei gained smartphone market share in China, which hurt the company.
The two companies are in a royalty dispute and Qualcomm excluded licensing revenue Huawei in its forward guidance.

Revenue for the June quarter saw a drop of 13% YOY, while net income also dropped 34%. Guidance for the September quarter was also below expectations.

The company’s pres release read, “slower demand for 4G devices as the market prepares for the global
transition to 5G” was a key reason for the weakness in its results.

“The Huawei export ban, along with the pivot from 4G to 5G, which accelerated over the past couple of months, has contributed to industry conditions, particularly in China, that we expect will create headwinds in our next two fiscal quarters, ” Mollenkopf said on Wednesday.

“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 benefits in product or licensing revenue.”

Qualcomm said that its fiscal fourth-quarter guidance excludes “revenues for royalties due on sales of products by Huawei,” which may have contributed to the miss.

“With regards to Huawei, we continue to pursue a negotiated resolution of the dispute, focused on a final
agreement,” Mollenkopf said.

Huawei has been on a U.S. blacklist that restricts American firms from selling products to it.
“The China market for us has slowed and it’s had an impact on how we see the full 2019 playing out as demand signals (and the) overall economy in China slowed and then demand signals for semi equipment and for our business in particular slowed as a result of slowing demand,” Bob Swan, CEO of Intel, also said on Wednesday to CNBC.

Disclaimer: We have no position QUALCOMM, Inc. (NASDAQ: QCOM) and have not been compensated for this article.