Pesky Wall Street.
No matter how well you perform, the stock market – understandably, because it reflects investors’ view of future prospects – is all about “what’s next”?
Qualcomm Inc., riding a wave of global demand for W-CDMA-enabled handsets – and strong performances by Samsung Electronics Co. Ltd. and LG Electronics Co. – delivered strong revenue and profit in the fiscal second quarter.
And, just as importantly, the San Diego-based chip vendor and intellectual property licenser said its outlook was sunny.
“Based on the current business outlook, we are raising fiscal 2008 revenue and earnings-per-share guidance,” said Qualcomm’s CEO Paul Jacobs last week.
(The statement, while candid, glossed over potential, short-term macro-economic uncertainties.)
Qualcomm’s stock rose nearly 1% on the outlook and the company’s earnings news.
Revenue for the quarter reached $2.6 billion, up 17% from the year-ago quarter. Net income reached $766 million, up 6% over the year-ago quarter. Both metrics exceeded analysts’ forecasts.
TI outlook conservative
In contrast, Dallas-based Texas Instruments Inc. reported nearly $3.3 billion in first-quarter revenue, up 3% from the year-ago quarter, and posted net income of $662 million, a strong increase of 28% over the year-ago quarter. Those figures matched Wall Street expectations, which had been tempered in March when TI said weak 3G sales to a large customer would impact the quarter’s profits.
But TI’s short-term outlook acknowledged partly cloudy skies.
“Given the uncertainty in the near-term economy, we have become more conservative with our outlook for the second quarter,” said TI’s CEO Rich Templeton. “More strategically, we believe our long-term opportunity is excellent.”
“In addition to traditional markets in communications and entertainment, analog semiconductors and digital signal processors are at the heart of solving some of the world’s most challenging problems in healthcare, energy and security,” Templeton added in prepared statements. “We’ve achieved early positions in each of these (sectors), all of which are just beginning to leverage semiconductor technology.”
But Wall Street’s fixation on the current quarter sent TI’s stock down 6% immediately after Templeton delivered his outlook.
“This year, TI’s outlook is a bit muted,” said Will Strauss, principal at Forward Concepts, a semiconductor market research firm. “Next year, it looks pretty good.”
Global forecast
Nokia Corp., which dominates the global handset market, remains TI’s largest customer and the Finnish giant in mid-April suggested that the high-tier handset market might soften in the current quarter, Strauss noted. Meanwhile, in the United States, Nokia’s presence remains weak. And TI is losing some business it does with Ericsson Mobile Platforms, which has shifted some chip demand to STMicroelectronics Inc., which is now merging with NXP (formerly Philips Semiconductor), the analyst said.
Next year, however, TI will deliver 3G chips for Motorola Inc.’s portfolio, a 3G chip for the merchant market and more business with EMP is in the cards, according to Strauss.
In contrast, Qualcomm dominates the CDMA and W-CDMA markets – the U.S. market is 60% CDMA – and its licensing business is strong and provides some visibility into the market that other chip vendors don’t have, the analyst said.
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Parsing the language of ‘the outlook’
For Wall Street, it’s all about the current quarter
“Given uncertainty in the near-term economy, we have become more conservative in our outlook for the second quarter,” said Rich Templeton, CEO of Texas Instruments Inc. “We believe our long-term opportunity is excellent.”
TXN stock sank 6% after Templeton’s statement
“The fundamental drivers of our business remain strong,” said Paul Jacobs, CEO of Qualcomm Inc., “and based on the current business outlook, we are raising fiscal 2008 revenue and earnings per share guidance.”
QCOM stock rose nearly 1% after Jacobs’ statement
