Qualcomm revenue, income plunges sequentially: Year-on-year revenue flat, income down for chip maker

Fiscal first-quarter revenue for Qualcomm Inc. reached $2.52 billion, up 3% year-on-year – the high-end of the company’s prior guidance – and net income reached $341 million, down 56% from the year-ago quarter.
One reason for the fall in income: losses in the chipmaker’s securities portfolio, yielding a loss of about $388 million.
“We’re pleased with the operations of our core businesses in this difficult environment,” CEO Paul Jacobs told participants on a conference call yesterday afternoon, after markets had closed.
Qualcomm’s stock dropped nearly 5% in after-hours trading as investors apparently were not as pleased.
Jacobs said the company was not considering “widespread layoffs,” though it was making “workforce adjustments” as necessary, particularly among its “contingent workforce.”
Qualcomm is prioritizing its research-and-development efforts in case of a prolonged downturn, the CEO said, and had a variety of cost-cutting opportunities to consider.
Jacobs acknowledged that the duration of the global downturn is unpredictable, but that “the current consensus is that this recession will be deeper and longer than previously anticipated.”
Qualcomm did not give earnings-per-share guidance, but said it expected that fiscal second-quarter revenue would reach $2.25 billion to $2.45 billion.
Qualcomm’s CEO said that the company’s chip sales depend on the buildout of 3G networks, which should come to fruition in the second half of the year. In other trends that would tend to favor Qualcomm, Jacobs mentioned carriers’ subsidies aimed at promoting smartphones, 20 Android products in the pipeline among handset vendors worldwide, Snapdragon design wins and the company is moving ahead on HSPA and LTE technologies. Qualcomm said it opposed any delays in switching U.S. television viewers to digital signals, having spent hundreds of millions of dollars on its own digital TV technology, dubbed MediaFLO.
After the company’s conference call, Global Crown Capital L.L.C. released a note saying “it appears that our fears for 2009 are coming true.”
“The economy and the obvious impact on consumer spending are affecting QCOM’s top-line outlook,” wrote analyst Pablo Perez-Fernandez. “We believe that the Koreans (i.e. LG and Samsung) will lose ground to Nokia this year, and this is negative for Qualcomm. Finally, key geographical end-markets for Qualcomm’s chips (i.e. China, India, Brazil, the U.S. and South Korea) are all generating lower-than-expected demand.”
“We continue to believe that Qualcomm will gain share throughout the downturn, emerging in a relatively enviable position,” Perez-Fernandez wrote. “We also expect Qualcomm to become a key 3G chipset supplier to Nokia. However, we cannot recommend buying the market leader in the context of a rapidly deteriorating economy and with the eroding fundamentals of the handset industry. We believe Qualcomm should rebound faster and do better than most other companies in the space when the downturn end, but we see potential downside at this point … We believe that consumers will slowdown replacement purchases and trade down to cheaper alternatives whenever they are inclined to do so.”