Qualcomm Inc. (QCOM), the largest developer of CDMA-based mobile phone chipset, raised its financial guidance for the second quarter of fiscal 2010, ending March 28. Management announced strong demand for both its licensing business and chipset sales together with a favorable product-mix as the primary reasons for this solid performance.
Qualcomm now expects that its second quarter revenue will be within the range of $2.55 billion – $2.65 billion compared to the previous guidance of $2.40 billion – $2.60 billion. MSM chipset shipment will be approximately 92 million – 93 million compared to 88 million – 92 million estimated earlier.
Although the company did not update its previous estimate for CDMA/WCDMA device shipment as well as average selling price, we believe Qualcomm benefited from the higher sale of 3G CDMA smartphones.
The revised estimate for GAAP EPS is 42 cents – 44 cents compared to the prior guidance range of 35 cents – 39 cents. For pro-forma EPS, the new estimate is 56 cents – 58 cents compared to the prior guidance of 49 cents – 53 cents.
According to our view, favorable product-mix, as depicted by management, is the main reason for bottom-line improvement. This may help the company to reduce margin pressure it faced in the previous quarter.
According to our assessment, in 2010, Qualcomm may become the first CDMA chipset developer with the ability to support all existing software platforms for smartphones. The company’s new venture in the small-size laptop market leveraging its state-of-the art Snapdragon platform also gets initial market traction which will provide a growth opportunity.
Robust growth of 3G networks and a solid net cash position of nearly $19 billion, also serve as long-term catalysts for the company.
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