Wednesday after the bell, wireless kingpin Qualcomm Inc. (QCOM) announced that its first quarter net earnings declined 56% from last year and 61% sequentially, hurt by weakening demand for its wireless chips and additional impairments of its marketable securities portfolio, reflecting the distress in global financial markets. Citing the difficult business environment, the company also slashed its revenue guidance for fiscal 2009.
Qualcomm operates under four reportable segments: Qualcomm CDMA technologies or QCT, Qualcomm Technology Licensing or QLT, Qualcomm Wireless & Internet or QWI and Qualcomm Strategic Initiatives or QSI. The QSI segmental results include the company's strategic investments, including its MediaFLO USA subsidiary, and related income and expenses.
The San Diego-based chipmaker reported GAAP net income for the quarter of $341 million or $0.20 per share, compared with $767 million or $0.46 per share in the same period last year.
Included in the GAAP net income of the first quarter ended December 28, 2008 are $99 million or $0.06 per share attributable to estimated share-based compensation, and a loss of $80 million or $0.05 per share attributable to the QSI operating segment.
The GAAP net income of the year-ago first quarter factored in $84 million or $0.05 share attributable to estimated share-based compensation and a loss of $20 million or $0.01 per share of the QSI operating segment.
Excluding items, Qualcomm's pro forma net income for the recent first quarter was $520 million or $0.31 per share, in comparison with $872 million or $0.52 per share in the year-ago quarter. On average, 20 analysts polled by FirstCall/Thomson Financial expected the company to earn $0.47 per share.
In the first quarter of fiscal 2009, Qualcomm's revenue increased 3% to $2.51 billion from $2.44 billion in the same period prior year and handily beat Wall Street analysts' revenue consensus estimate of $2.42 billion.
Equipment and services revenue contributed $1.42 billion to the total revenue of the recent first quarter, in comparison with $1.70 billion in the same period last year. Licensing and royalty fees for the quarter totaled $1.09 billion, up from $737 million in the year-ago period.
Research & Development expenses for the quarter rose 18% to $604 million from $511 million in the comparable quarter prior year. On a pro forma basis, R&D expenses for the first quarter of fiscal 2009 were $511 million, compared to $430 million in the year-earlier quarter. The increase in R&D expenses was attributed to costs related to the development of integrated circuit products, next-generation CDMA and OFDMA technologies, the expansion of the company's intellectual property portfolio and other initiatives to support the acceleration of advanced wireless products and services.
The QCT segment notched up revenues of $1.33 billion in the recent first quarter, down 15% from last year. The segment's pre-tax earnings for the quarter were $168 million, compared to $470 million in the year-ago period.
Revenues from the QTL segment rose 55% to $1.00 billion from the year-ago quarter. The segment's pre-tax earnings totaled $874 million, up 62% from the year-ago quarter.
Revenues from the QWI segment for the quarter were $170 million, down 19% from the year-ago quarter. The segment's pre-tax earnings for the quarter plunged 88% to $3 million.
The CDMA gorilla had cash and cash equivalents and marketable securities of $13.1 billion at the end of the first quarter of fiscal 2009. On January 16, the company announced a cash dividend of $0.16 per share. The dividend is payable on March 27, 2009 to stockholders of record at the close of business on February 27, 2009.
Due to the volatility of financial markets, the company has not provided its outlook for earnings per share. Looking ahead to the second quarter, the company forecast revenues in the range of $2.25 billion - $2.45 billion, in comparison with $2.60 billion reported in the year-ago quarter. Wall Street analysts have a consensus revenue estimate of $2.41 billion.
In the second quarter of fiscal 2009, the company expects to ship about 60 million to 65 million MSM chips, compared to about 85 million MSM chips shipped in the same period a year before. According to the company, despite weak economic conditions, wireless subscribers continue to migrate from second-generation to third-generation CDMA networks around the world. The company's CDMA/WCDMA* handset shipments for the second quarter are projected at 116 million to 121 million units, in comparison with about 112 million units shipped in the comparable period a year before. (*Shipments in December quarter, reported in March quarter.)
Qualcomm expects the wholesale average selling price of CDMA/WCDMA handset in the second quarter to be about $207, down from $222 in the comparable period a year before.
For fiscal year 2009, the company slashed its revenue guidance range to $9.3 billion - $9.8 billion from its prior forecast of $10.2 billion - $10.8 billion. The revised outlook represents 12% - 16% decline from the revenue of $11.13 billion reported in 2008. Wall Street analysts have revenue estimate pegged at $10.25 billion.
Qualcomm now expects CDMA/WCDMA handset shipments to number 540 million - 590 million in calendar year 2009, compared with prior expectations of 580 million - 620 million. The company now sees the wholesale average selling price of CDMA/WCDMA handset in calendar year 2009 to be $202, compared to its prior expectation of $195.
Commenting on the results, Paul Jacobs, CEO of Qualcomm said, "The CDMA inventory channel has contracted as we expected, and the business environment continues to remain uncertain. Reduced visibility in the marketplace makes it difficult to forecast future inventory levels or predict when a recovery will begin. As a result, while we continue to estimate healthy growth in the CDMA-device market, we have lowered our shipment estimate for calendar year 2009."
QCOM closed Wednesday's trade at $36.82, up 3.34% on a volume of 30.8 million shares. However, in the after-hours the stock was down 5.62% and was at $34.75. In the last twelve months, the stock has traded in the range of $28.16-$56.88.
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