Qualcomm Inc. is scheduled to announce earnings for its fiscal first quarter after the market closes Wednesday. Here's what to look for:
EARNINGS FORECAST: Analysts expect Qualcomm to report earnings of 91 cents a share on an adjusted basis, according to Thomson Reuters, down nearly 24% from $1.19 the same quarter a year earlier. Qualcomm's adjusted earnings exclude stock-based compensation and other items.
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REVENUE FORECAST: Analysts expect total revenue of $5.93 billion for the quarter, down 1% from $6 billion a year earlier.
WHAT TO WATCH
THE BROADCOM SHADOW: What Qualcomm says about its path to revenue and earnings growth likely will eclipse the quarter's results, analysts said. The chip maker, facing a hostile takeover bid by Broadcom Ltd. and continuing attacks on its business model from customers and regulators, assured investors in a recent presentation it could boost profit by fiscal 2019, increasing adjusted per-share earnings to between $6.75 and $7.50. Qualcomm made several assumptions in that calculation: First, that it can shed $1 billion in costs; second, that it either completes its proposed purchase of NXP Semiconductors NV or buys back stock to provide an equal earnings bump; and third, that it resolves conflicts with customers including Apple Inc., which has been blocking royalty payments while it pursues court cases alleging Qualcomm engages in unfair practices. "This is a key opportunity for Qualcomm to make the case for their long-term business plan," said Mike Walkley of Canaccord Genuity Group Inc. "That's the crux of this quarter."
WILL THE NXP DEAL CLOSE? Qualcomm's promise to boost profits by buying back shares if it doesn't complete its proposed $39 billion purchase of NXP offers shareholders assurance they will benefit even if the transaction doesn't go through. The deal is important not only for the $1.50 Qualcomm estimates it would add immediately to adjusted per-share earnings, but also as a bulwark against Broadcom, which appears to want Qualcomm's cash at least as much as it wants the automotive chip leader. The transaction has been approved by antitrust regulators everywhere but China. Even with a nod from China, though, Qualcomm has to entice NXP investors to tender their shares. NXP's stock price has exceeded the $110-a-share offer since the summer, and only 1.7% of outstanding common shares were tendered as of Jan. 12, when Qualcomm last extended its offer. Investors will be on the lookout for signs of how Qualcomm might persuade reluctant NXP shareholders.
CHIP SALES MOMENTUM: Qualcomm's chip revenue jumped nearly 13% in the fourth quarter as the company continued to gain traction in China, and there are signs that trend will continue. The chip maker recently announced nonbinding agreements with Chinese vendors to buy $14 billion in Qualcomm products over the next three years. Still, the picture is cloudy. Bernstein Research's Stacy Rasgon cited data showing fourth-quarter shipments of 3G and 4G mobile devices in China dropped nearly 23% from the previous year. Meanwhile, Apple slashed the current quarter's planned production run of iPhone X, The Wall Street Journal reported, and a portion of iPhone X units contain Qualcomm chips. Investors will be looking for evidence that exports from China and launches of new Android smartphones will pick up the slack.
Write to Ted Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
January 31, 2018 06:14 ET (11:14 GMT)
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