Royalties Help Profit Double at Qualcomm
Cellphone chip maker Qualcomm Inc. said Wednesday that its fiscal third-quarter profit more than doubled, boosted by royalties it received for its wireless phone-transmission technology.
San Diego-based Qualcomm earned $486 million, or 58 cents a share, in the three months ended June 27, compared with $192 million, or 23 cents, in the same period a year ago. Sales jumped to $1.34 billion, up 50% from $892 million last year.
The earnings results beat the estimates of analysts surveyed by Thomson First Call by 5 cents a share, and management increased its guidance for the fourth quarter. Qualcomm stock, which fell $1.85 to $67.68 in regular Nasdaq trading, bounced back to $68.10 in the after-hours session after the results were released.
Net income in the current quarter will be 53 cents to 56 cents a share, up as much as 65% from last year’s fourth quarter, Chief Financial Officer William Keitel told analysts in a conference call. Analysts had expected 50 cents.
Profit for the third quarter was up largely because of increased adoption of the company’s wideband wireless technology, known as WCDMA, which allows high-speed Internet access via mobile phones, Chief Executive Irwin Mark Jacobs said. It is based on Qualcomm’s CDMA, or code division multiple access, technology, which has become the dominant standard for wireless calling in the U.S.
Wireless carriers, including Sprint Corp. and Verizon Wireless, and handset makers such as Motorola Inc. and Samsung Electronics Co., pay royalties to Qualcomm for using its technology.
About 80% of the world’s wireless carriers use rival standards known as TDMA and GSM, but they are increasingly shifting to WCDMA, said Scott Sutherland, an analyst at Wedbush Morgan Securities in Los Angeles.
“Demand for handsets seems robust and growing,” Sutherland said.
Michael Cohen, a technology analyst at San Diego-based Pacific American Securities, said Qualcomm had lots of room for growth as carriers switched to WCDMA.
“This appears to be a huge opportunity for Qualcomm that is only now in its very early stages,” Cohen said.
Qualcomm’s sales of phone chips in the quarter more than doubled to $554 million, and revenue from licensing its CDMA and WCDMA technologies jumped more than fivefold to $242 million, the company said.
