Qualcomm Forecasts Top Estimates on Surging Smartphone Sales

By Ian King - Nov 3, 2011 6:24 AM GMT+0700

Qualcomm Inc. (QCOM), the biggest maker of mobile-phone chips, forecast higher fiscal 2012 sales than analysts had predicted, adding to evidence of robust demand for smartphones. The shares jumped 9.7 percent in late trading.

Sales for the year ending in September 2012 will be $18 billion to $19 billion, the San Diego-based company said today in a statement. That compares with an average analyst estimate of $17.3 billion, according to Bloomberg data.

Qualcomm, which gets most of its profit from licenses on technology used in so-called 3G phones, is benefiting as more consumers switch to the technology -- especially in developing countries. Widening use of smartphones fuels growth in royalty revenue and sales of cellular radio chips and processors.

“They are a market-share leader in a growing market,” said Daniel Berenbaum, an analyst at MKM Partners LLC in New York. He recommends buying Qualcomm shares, which he doesn’t own. “Anything in wireless that grows is good for Qualcomm. It’s a dominant position.”

Qualcomm shares rose as much as $5.06 to $57.24 in extended trading after the report. The stock, up 5.4 percent this year, had closed at $52.18 in New York.

‘Not a Luxury’

While the forecasts topped analysts’ predictions, they’re not as high as Qualcomm initially set internally, Chief Executive Officer Paul Jacobs said in an interview. The company revisited projections amid signs of global economic weakness, he said.

“In a time of macroeconomic uncertainty, we’ve got a lot of different customers and geographies to balance that out,” Jacobs said. At the same time, “it does seem to me that the phone is not a luxury item -- it’s a staple.”

Qualcomm, whose customers include Samsung Electronics Co. and Apple Inc. (AAPL), licenses a technology called code division multiple access, or CDMA, to handset makers and wireless carriers.

Fourth-quarter net income rose to $1.06 billion, or 62 cents a share, from $865 million, or 53 cents, a year earlier. Revenue climbed 39 percent to $4.12 billion in the period, which ended Sept. 25. Analysts on average projected that the company would report profit of 66 cents on sales of $4 billion.

Profit in fiscal 2012 will range from $3.42 to $3.62 a share, excluding some items, Qualcomm said. In the current quarter, the company expects sales of $4.35 billion to $4.75 billion and a profit of 86 cents to 92 cents a share. Analysts are estimating revenue of $4.25 billion and profit of 84 cents.

Qualcomm aims to expand the reach of its chips with a microprocessor called Snapdragon. That chip is now running smartphones based on Google Inc.’s Android operating system. The company is also trying to sell Snapdragon to tablet makers.

The processor will be used in tablets and computers that run future versions of Microsoft Corp.’s Windows software, putting Qualcomm in more direct competition with Intel Corp. (INTC), the world’s largest chipmaker.

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net;

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net