A strong Q1 for Qualcomm(QCOM): The company beat expectations for revenues and earnings, and raised guidance for the year. The street isn’t overwhelmed, though, and the stock is down 2.6% in the aftermarket. We’ll hazard a couple guesses as to why: QCOM gives out conservative guidance, and investors wanted much more than what they got; revenues are increasing faster than earnings; concern about ASPs for some products decreasing at the end of the year — a topic that came up repeatedly in the call.
Revenues: $2.61 billion, up 17% y/y, vs $2.5 billion expectations
Operating Income: $894 million, up 7% y/y, (excluding one-time expenses)
EPS: $0.54, vs. $0.51 expectations
The company also raised FY 2008 guidance: It jacked up revenue goals by 13%-17%, and earnings by 1%-4%.
4:45 call starts
4:49: CEO Dr. Paul Jacobs: CDMA chip shipments up 39%
4:52: MediaFLO TV on mobile Business: Jacobs is “very pleased with bidding in E-Block spectrum.” Purchased key licenses on both the East and West coast in spectrum option. Mobile TV with FLO will launch on AT&T later this year.
4:54: 3G CDMA doing really well. More than 465 CDMA based 3G networks have been launched as of April 2008. And there are 620 million 3G CDMA users, a 36% increase y/y.
4:56: International 3G CDMA doing really well too — Japan, Europe, Korea, India, China, Latin America.
4:59: Litigation with Nokia: “We’re pleased with consolidation in Delaware. We’re working hard to prepare for phase 1 of the trial which begins in late July.”
5:00: Steve Altman, president: CDMA prices are declining and they will replace lower priced GSM handsets
5:02: Litigation — Broadcom: Filed the appeal on March 21 to Federal Circuit which granted motion for expedition. Filed a request for reexaminiation for two of Broadcom’s patents. Patent and Trademark Office has preliminarily rejected all the claims against QCOM in both patents.
5:05: Very little progress on settlement discussions in Nokia case.
5:05: Dr. Sanjay Jha, COO: QCOM can attribute much of the shipment growth of chipsets to increased demand for entry level products. Demand for high speed mobile broadbrand has also driven demand for shipment of chipsets.
5:09: Currently there are over 50 designs for Snapdragon mobile computing platform, which is scheduled to launch later this year.
5:12: Bill Keitel, CFO: Resolved royalty payment dispute with Sony Ericsson.
5:16: Average selling price for CDMA pphones will increase 1% in fiscal 2008, above prior expectations.
5:18: We expect the R&D expenses to increase by 2%.
Q: Walk us through the EPS guidance change from Q2 to Q3
A: Midpoint is .51 cents. 3 cent decline from this quarter, 2 cents from licensing business. Other penny from tax and operating expenses.
Q: Royalty rate ticked down for second or third quarter in a row? Any chance we’ll see it rise?
A: Nokia not reporting royalties due to litigation is a “not small factor.” Sony Ericsson should add 5-25% in March quarter over December quarter.
Have been expecting steady increases on R&D expenses. It’s performing pretty closely to original plans. — Jacobs
Jha: ASP will stay strong next quarter, decrease in coming quarters for chipsets.
Jha: CDMA market share is increasing, and QCOM’s market share has increased.
Keitel: Stock repurchases have made it so most of our cash is onshore ($6 billion to $4 billion).
Q: Giving implied guidance for 4th quarter and I’m very surprised to see that EPS goes down from 52 cents to 49 cents. Why so conservative?
A: On the 4th quarter guidance, I would point out that our operating income growth y/y is 4 cents/share. The chip business earnings expect to be relatively flat y/y in the quarter. We’re going to see quarterly swings in chipset revenue.
5:55: Call ends
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