Tag Archives: technology

While not mentioning Apple ( AAPL ) by name, Qualcomm ( QCOM ) implied it will lose business to Intel ( INTC ) as a chip supplier for the iPhone 7, Apple’s newest smartphone expected to launch this fall. The comments came during the company’s quarterly earnings  conference call after the market close Wednesday, with Qualcomm’s EPS guidance falling short of Wall Street estimates. Qualcomm CEO Steve Mollenkopf told analysts it was important for planning purposes to factor in “a range of second-sourcing assumptions at our large customers.” He said improving demand for premium and high-tier devices in the second half of the fiscal year would be “offset by reduced demand for thin modem products and low-tier chipsets.” “Apple iPhone 7 modem share loss is confirmed,” wrote Pacific Crest Securities analyst Michael McConnell in a research note late Wednesday, a point of view shared by other analysts. The understanding is that Intel will be a second-source supplier to Apple for chips in the iPhone 7 that manage connections to wireless networks, called either modem or baseband chips. Qualcomm is expected to remain the primary supplier to Apple for these chips, but the win by Intel was seen as a setback to Qualcomm, the leading smartphone chip developer. McConnell says Qualcomm is likely to lose a 20% to 30% share of baseband chips in the new iPhone to Intel, worth annual revenue of about $600 million to $900 million, he wrote. He maintained an overweight rating on Qualcomm but lowered the price target to 61 from 63. Qualcomm stock was down about 1%, near 51.50, ahead of the closing bell in the stock market today . Qualcomm stock is down 25% in the past year. Smartphone Slowdown Weighs On Qualcomm The loss to Intel comes as Qualcomm is maneuvering through a slowdown in smartphone sales as the market nears saturation. Qualcomm lowered its guidance on smartphone device sales to about 1.67 billion in 2016 from previous guidance of 1.72 billion. It expects year-over-year growth of about 8%, down from 10%. IDC estimates smartphone shipments in 2015 rose 10% to 1.4 billion units, slowing from 27% growth in 2014. IDC expects smartphone growth in China to be flat in 2016. It was the maturing smartphone market and the potential for market share loss that that caused Rosenblatt Securities to downgrade Qualcomm to neutral from buy, though it maintained a price target of 57. RBC Capital analyst Amit Daryanani said there was a lot to digest in the Qualcomm earnings report, given the increased uncertainty. Risks to the stock price include lower smartphone pricing, lower royalty rates, increased competition from a variety of manufacturers and slower smartphone growth. Qualcomm is dealing with the market changes in multiple ways. It has focused on a $1.4 billion cost-reduction plan, boosting cash flow and profit, bolstering research and development, positioning for industry growth and making China licensing a top priority, among other steps. The company says that it’s on track to realize at least $700 million in savings in fiscal 2016, an increase of $100 million from its original estimate. Qualcomm reported revenue of $5.6 billion for the quarter ended March 27, down 19% from the year-earlier quarter but beating the consensus estimate of $5.34 billion. It was the fourth quarter in a row of decelerating revenue, year over year. Earnings per share minus items fell 26% to $1.04, but that number topped the 96-cent consensus estimate of analysts polled by Thomson Reuters. It was the fourth quarter in a row that EPS has decelerated. Qualcomm’s fiscal Q3 revenue guidance beat, but views on EPS missed.