Yesterday, after market close, Qualcomm Inc. (QCOM) reported financial results for its first quarter of fiscal 2010. Although the quarterly results broadly meet our estimates, the company has reduced its guidance for full fiscal 2010.
Management cited ever increasing competition, slower recovery of high-end mobile phones in the developed markets, particularly in Europe and Japan; together with relative strength of the low-end mobile phones in the emerging markets as the primary reasons for this disappointing outlook. As a result, in the after-market trade in Nasdaq, stock price of Qualcomm was down $4.80 (10.2%) to $42.40.
Quarterly revenue of $2.67 billion was up 6% year over year. However, quarterly revenue was also below the Zacks Consensus Estimate of $2.70 billion. The year over year increase in revenue was mainly due to a healthy demand for Qualcomm chipsets driven by the strong shipment of 3G mobile handsets throughout the world. On a GAAP basis, quarterly net income was $841 million or 50 cents per share compared to $341 million or 20 cents per share in the year-ago quarter. First quarter 2010 EPS of 50 cents was exactly in line with the Zacks Consensus Estimate.
Quarterly operating income was $879 million, up 18% year over year. This was mainly due to lower R&D and Selling, General, & Administrative expenses. During the reported quarter, the company shipped around 92 million MSM chipsets, up 46% over the prior-year quarter. Average selling price of mobile handsets with inbuilt Qualcomm chipsets was $179 during this quarter.
During the reported quarter, Qualcomm generated nearly $1.24 billion of cash from operations compared to $3.5 billion (including $2.5 billion of payment received from Nokia Corp. (NOK) related to the license and settlement agreements) in the prior-year quarter. Free cash flow (cash flow from operations less capital expenditures) during the same quarter was approximately $1.15 billion compared to $3.27 billion in the year-ago quarter. At the end of the first quarter of fiscal 2010, the company had more than $18.93 billion of cash and marketable securities and no outstanding debt on its balance sheet compared to $17.74 billion of cash and marketable securities and no outstanding debt at the end of the previous quarter.
Segment Results
Qualcomm CDMA Technologies business accounted for $1,608 million of revenue in the first quarter, up 21% over the prior-year quarter but down 5% sequentially. Quarterly operating margin was 26%. Qualcomm Technology Licensing generated $917 million, down 9% year over year but up 10% sequentially. Quarterly operating margin was 84%. Qualcomm Wireless & Internet segment generated $142 million, down 16% over the prior-year quarter and down 3% sequentially. Quarterly operating margin was 6%.
Second Quarter of Fiscal 2010 Guidance
Second quarter revenue will be within the range of $2.40 billion−$2.60 billion. Pro forma EPS will be within the range of 49 cents to 53 cents. Qualcomm is expected to ship 88 million–92 million MSM chipsets during the quarter.
Full Fiscal 2010 Guidance
Full fiscal 2010 revenue will be within the range of $10.40 billion−$11.00 billion. Pro forma EPS will be within the range of $2.10 to $2.30. Qualcomm is expected to ship 600 million–650 million MSM chipsets during calendar year 2010.
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