Telecom chipmaker Qualcomm Inc. (QCOM) said Thursday that its fourth quarter profit declined 22% from last year, due to the absence of tax benefit recorded in the year-ago period, and other-than-temporary impairments of marketable securities. The company also provided financial outlook for the first quarter and fiscal 2009, below Street estimates.
Q4 Results
Net income for the fourth quarter was $878 million or $0.52 per share, down 22% from $1.13 billion or $0.67 per share in the prior year quarter.
Results for the quarter under review included share-based compensation expense of $98 million or $0.06 per share, and a charge of $82 million or $0.05 per share related to the QSI operating segment. Results for the quarter also included $327 million in other-than-temporary impairments of marketable securities, related to the impact of the recent disruption in the financial markets on marketable securities portfolio.
During the fourth quarter of fiscal year 2007, the company recorded a tax benefit of $331 million or $0.20 per share, related to tax expense recorded in prior years resulting from the completion of tax audits.
Excluding items, pro forma net income rose 16% to $1.06 billion from $911 million in the previous year quarter. Pro forma earnings per share advanced 17% to $0.63 from $0.54 last year. On average, 13 analysts polled by First Call/Thomson Financial expected the company to earn $0.60 per share for the fourth quarter. Analysts' estimates typically exclude special items such as nonrecurring one-time items.
The San Diego, California-based company's revenues increased 45% to $3.334 billion from $2.306 billion in the same quarter last year. On a pro forma basis, revenues grew 44% to $3.329 billion from $2.305 billion in the preceding year quarter. Eighteen analysts had a consensus revenue estimate of $2.86 billion for the fourth quarter.
The company noted that a license and settlement agreement with rival Nokia Corp. (NOK) boosted revenue by $560 million.
Equipment and services revenue contributed $1.866 billion to the total revenue of the fourth quarter, up from $1.569 billion, while licensing and royalty fees grew to $1.468 billion from $737 million in the year-ago quarter.
Qualcomm operates under segments - Qualcomm CDMA Technologies or QCT, Qualcomm Technology Licensing or QTL, 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 and are not included in the pro forma results provided by the company.
QCT revenues rose 24% to $1.761 billion, QTL revenues jumped 112% to $1.374 billion, and revenues from QWI dropped 22% to $190 million from a year ago. QSI revenues surged to $5 million over last year.
Research & Development expenses for the fourth quarter rose to $621 million from $481 million in the comparable quarter prior year. Pro forma R & D expenses increased 29% year-over-year to $528 million from $410 million, 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.
Qualcomm faced a spate of legal challenges related to patents, anti-trust allegations and regulatory issues from Nokia. A cross licensing pact, which allows Nokia to use Qualcomm's patents for CDMA by paying certain licensing fees, was also languishing in arbitration following the expiry of the contract in April 2007, as the two parties could not agree on the terms of renewal.
Finally, Qualcomm entered into an agreement with Nokia, which covers various standards including GSM, EDGE, CDMA, WCDMA, HSDPA, OFDM, WiMAX, LTE and other technologies.
Under the terms of the new 15-year agreement, Nokia has been granted a license under all Qualcomm's patents for use in Nokia mobile devices and Nokia Siemens Networks infrastructure equipment. Nokia agreed not to use any of its patents directly against Qualcomm, enabling Qualcomm to integrate Nokia's technology into Qualcomm's chipsets.
Qualcomm still has a stream of legal challenges ahead related to patents, anti-trust allegations and regulatory issues, brought by its arch rival Broadcom Corp. (BRCM).
Full-year results
For fiscal 2008, Qualcomm posted net income of $3.16 billion or $1.90 per share, compared to $3.30 billion or $1.95 per share in the previous year. Pro forma net income was $3.74 billion or $2.25 per share, up from $3.41 billion or $2.01 per share a year-ago.
Total revenues increased to $11.142 billion from $8.871 billion in the preceding year. On a pro forma basis, annual revenues increased 25% to $11.13 billion from $8.870 billion in the prior year.
The Street expected the company to report earnings of $2.22 per share for the year on revenue of $10.67 billion.
Outlook
Going forward, the company anticipates first quarter GAAP earnings of $0.35 to $0.39 per share, pro forma earnings of $0.46 to $0.50 per share, and revenues of $2.3 billion to $2.5 billion.
Analysts currently expect the company to report earnings of $0.61 per share on revenues of $2.91 billion for the first quarter.
For 2009, the company expects GAAP earnings of $1.61 to $1.71 per share, pro forma earnings of $2.00 to $2.10 per share, and revenues of $10.2 billion to $10.8 billion.
Analysts currently project the company to report earnings of $2.59 per share on revenues of $12.16 billion for fiscal 2009.
Stock movement
Qualcomm stock closed Thursday's regular trading session at $33.05, down $2.12 or 6.03% on a volume of 42.32 million shares. In after-hours, the shares further lost $1.00 or 3.03%. The stock has been moving in a range of $32.21 - $56.88 for the past 52 weeks, with a three-month average volume of about 24.73 million shares.
For comments and feedback: editorial@rttnews.com