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Qualcomm Again Cuts Outlook, Blaming Apple, Samsung

The chipmaker said it will look for ways to cut costs.

Asa Mathat

Qualcomm on Wednesday cut its earnings forecast for the second time this year after reporting that its past quarter’s earnings dropped 45 percent from the prior year.

The San Diego-based company reported quarterly earnings of $1.1 billion, or 63 cents per share, on revenue of $6.9 billion. That compares to earnings of $2 billion, or $1.14 per share, on revenue of $6.4 billion in the year-ago quarter.

Excluding certain factors, though, earnings per share were $1.40, a 7 percent increase. That was ahead of the $1.33 expected by analysts, according to Zacks.

For the current fiscal year, Qualcomm says it now expects revenue of between $25 billion and $27 billion, down from a prior outlook of $26.3 billion to $28 billion. It also cut its earnings outlook for the year.

In cutting its forecast, Qualcomm again blamed the same two factors — Apple’s strength and the fact Samsung went with its own processor for the Galaxy S6 (though Qualcomm used euphemisms rather than mentioning Apple and Samsung by name). Qualcomm cut its outlook for the year for the first time back in January.

“While we remain confident in the significant growth opportunities ahead, we are reducing our QCT outlook for fiscal 2015, primarily due to the increased impact of customer share shifts within the premium tier and a decline in our share at a large customer,” CEO Steve Mollenkopf said in a statement.

The company’s shares traded down after hours, changing hands recently at $67.34, down $1.60, or more than 2 percent.

Qualcomm also announced it will look at ways to cut costs.

“In addition to our ongoing expense management initiatives, we have initiated a comprehensive review of our cost structure to identify opportunities to improve operating margins while at the same time extending our technology and product leadership positions,” Mollenkopf said.

Mollenkopf said the company’s recent settlement with the Chinese government should help its licensing business there. That said, it won’t be immediate and may still require the company to go to court.

“While we are making good progress, we do expect this process to extend beyond this fiscal year,” president Derek Aberle said on the conference call. “It is also possible that in some cases it may require litigation and/or other actions to compel certain licensees to honor their contracts, and for unlicensed companies to execute new licenses. We are prepared to pursue that path if it becomes necessary.”

Also, Qualcomm said on its earnings call that it has received word of a new inquiry from Korea’s Fair Trade Commission, with that also likely centered around the company’s licensing business.

Also, as first reported by Re/code this week, Qualcomm is hoping to regain Samsung’s business for next year’s flagship phone by making its next-generation high-end chip, the Snapdragon 820, in Samsung’s own factories.

Update, 2:12 p.m. PT: On its earnings call, Mollenkopf said that Qualcomm is also expecting to lose its chip position in other high-end Samsung products this year. “We anticipate a similar share picture to what you see on GS6,” he said, adding that Samsung is also putting more emphasis on this year’s models rather than legacy products, further hurting its business for 2015.

Mollenkopf didn’t confirm the 820 will be made at Samsung’s plants, but said he expects Qualcomm’s next chip to be much more competitive.

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