Qualcomm Results Beat Help Allay Worries Over Apple Dispute

Qualcomm Inc, the largest maker of chips used in smartphones, reported quarterly revenue and profit that beat analysts' estimates, helping ease concerns surrounding the company's dispute with Apple.

Investors pushed the company shares - the worst performer year-to-date on the Philadelphia semiconductor index - up 2.4 percent to $53.85 in after-market trading on Wednesday.

The iPhone maker sued Qualcomm in January, accusing the chipmaker of overcharging for its chips and refusing to pay some $1 billion in promised rebates.

Qualcomm said on Wednesday that Apple's contract manufacturers underpaid royalties in the second quarter, but revenue was not affected as the amount was similar to what Apple claimed Qualcomm owed it.

San Diego-based Qualcomm also warned that it was unclear whether Apple's contract manufacturers would underpay royalties owed in the third quarter, leading to the wider-than-usual profit forecast for the period.

However, Qualcomm Chief Executive Steve Mollenkopf said on a post-earnings call that the company expected to continue to be an "important supplier to Apple now and into the future".

Qualcomm forecast current-quarter adjusted profit of 90 cents-$1.15 per share and revenue of $5.3 billion-$6.1 billion.

Analysts on average were expecting a profit of $1.09 per share and revenue of $5.94 billion, according to Thomson Reuters I/B/E/S.

The royalties issue also weighed on Qualcomm's second-quarter results.

The quarter included a $974 million reduction to revenue, or 48 cents per share, related to an arbitration over a royalties dispute with BlackBerry Ltd.

Revenue fell 9.6 pct to $5.02 billion (roughly Rs. 32,464 crores) in the three months ended March 26.

On an adjusted basis, Qualcomm reported revenue of $5.99 billion, beating analysts' average estimate of $5.89 billion.

Despite the litigation worries, revenue in the Qualcomm Technology Licensing business rose about 5 percent to $2.25 billion (roughly Rs. 14,549 crores), ahead of the analysts' estimate of $2.24 billion, according to research firm FactSet StreetAccount.

The licensing unit contributed about 85 percent of the company's earnings before taxes in 2016.

Charter Equity analyst Edward Snyder attributed the results in part to catch-up payments by customers who had earlier disputed them.

"It's kind of a confusing mess right now on who's coming and who's going, that's one of the reasons that you're not seeing the stock perform better," Snyder said.

The company also said there was increased demand for its Snapdragon mobile chips, particularly in China, boosting revenue by 10 percent in its chip-making unit.

Qualcomm's market share in China is expected to increase to 65 percent this year from 50 percent in 2016, with share gains in Oppo, Vivo, Xiaomi and Meizu, Rosenblatt Securities analyst Jun Zhang wrote in a note.

Excluding items, Qualcomm earned $1.34 per share, above analysts' average estimate of $1.19.

© Thomson Reuters 2017