may have nowhere to go but up, but going up is still going to take a while.
That was evident following the company’s fiscal fourth quarter results Wednesday afternoon. They were generally ahead of Wall Street’s expectations, even with overall revenue turning negative again and adjusted operating earnings falling by 19% year over year. But Qualcomm also projected revenues for the December quarter in the range of $4.5 billion to $5.3 billion, which would imply a drop of 20% year over year at the midpoint. Even that is with a change in accounting that actually pushes more of the company’s licensing revenue into the first fiscal quarter than had been expected.
In short, the chip maker that still generates most of its business through smartphones is having a tough year and faces another tough one. Smartphone sales are slumping globally, and that trend seems unlikely to change next year, as rising prices encourage consumers to keep holding on to their existing phones for longer. Qualcomm’s near-term business also is smarting from its legal war with
which has shut out the company from the latest generation of iPhones. Qualcomm has projected modem chip shipments in the range of 175 million to 195 million for the December quarter, the midpoint of which implies a record-sized 22% drop year over year.
Qualcomm is placing high hopes on the launch of 5G networks next year. Most analysts don’t believe 5G will start generating significant sales of handsets and other devices until 2020, though. A settlement with Apple also doesn’t seem likely soon, especially after Qualcomm got hit with a ruling from a federal judge on Tuesday that seems to challenge some of the main tenets of its licensing business. That ruling was part of Qualcomm’s antitrust dispute with the Federal Trade Commission, though Qualcomm says it believes the ruling is incorrect, and it still expects a full trial on the matter in January.
Qualcomm’s shares fell 5% Wednesday after the results and already were in negative territory for the year. The current multiple of about 14 times forward earnings may limit further downside. After a bruising year of legal wars, government probes, hostile takeover attempts and a failed acquisition, Qualcomm investors are more than ready for some good news. It remains elusive.
Write to Dan Gallagher at firstname.lastname@example.org