Qualcomm brightens outlook, T.I. narrows view

Qualcomm Inc. said that it expected revenue in its current quarter, on a pro forma basis, would be just above the high-end of its prior guidance of about $2.5 billion to $2.7 billion. Meanwhile, Texas Instruments Inc. narrowed its range for the quarter’s revenue and said it saw weakness in the sale of its wireless products.
The improved outlook for Qualcomm is based on the company’s estimate that it would ship about 86 million MSM chips during the quarter, compared to its previous estimate of 85 million to 88 million. Those sales included an improved mix of W-CDMA to CDMA2000 chips, which the company said reflected the global ramp in 3G. (The current quarter is Qualcomm’s fiscal third quarter.)
The company’s chips are contained in estimated shipments of 107 million CDMA devices in the quarter, with average selling prices of about $226 per unit, compared to a previous estimate of 105 million to 109 million units with ASPs of about $223, according to Qualcomm.
“We are expecting another successful quarter driven by the continued global migration to 3G,” said Paul Jacobs, Qualcomm’s CEO. “Our updated guidance reflects greater than expected demand for our (CDMA2000) 1x EV-DO and HSPA chipsets, as well as revenue from advanced 3G network upgrades.”
Oppenheimer analyst Ittai Kidron said that “the positive trends are consistent with our expectations for smartphones and 3G traction to drive a higher-end mix of MSM (chips) and an associated increase in CDMA handset ASP.”
“We believe (this) mix will remain a positive catalyst going forward as the penetration of smartphones increases,” Kidron wrote in a note to investors. “We highlight that the June guidance doesn’t reflect the upcoming Research In Motion and Apple transitions to 3G HSPA, which can drive (additional increases in earnings per share).”
Uncertainties, however, continue to loom over aspects of Qualcomm’s business. For several quarters, its apparently robust earnings picture has omitted any revenue from Nokia Corp., the world’s largest handset vendor. And UBS analyst Maynard Um reminded investors that court proceedings focused on the cross-licensing dispute between Qualcomm and Nokia are slated to begin July 23. Also, a Broadcom Corp. challenge to Qualcomm’s work-around solution on a video compression technology is set to begin next month.
Meanwhile, Texas Instruments, the other mobile chip behemoth. narrowed its guidance for the current quarter. Revenue will likely reach $3.33 billion to $3.46 billion, compared with prior guidance of $3.24 billion to $3.5 billion, the company said. T.I. also narrowed its earnings forecast.
In a conference call with analysts, Ron Slaymaker, T.I.’s manager of investor relations, said that wireless handset revenue was “unseasonably weak” in the second quarter.
“In the first quarter we saw a pretty significant decline in the 3G mix (but) low-end (chips) were pretty much holding up,” Slaymaker told analysts. “In this quarter we’ve seen growth in 3G, but again that was compared to a very weak first-quarter level. However, that growth in 3G is being offset by weakness in legacy technologies, both entry-level and mid-range.”
Slaymaker added that the weakness in wireless legacy technologies may be due to certain customers’ weakness in sales, and not a regional matter. Some T.I. customers continued to do business at seasonally typical levels, he said.
“It’s really unclear to us at this point on how the overall handset market is performing,” Slaymaker added, “but what we’re seeing very well could be customer-
specific.”