What Can Be Expected From Qualcomm's Q1 Earnings of 2015?

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Jan 23, 2015

Chipset giant Qualcomm (QCOM, Financial) is slated to represent its first-quarter earnings on January 28 and analysts worldwide are speculating on the future of the stock which has not performed well in the past year having declined over 11% in the past six months. In the final quarter of 2014 that ended on September 30 the company was not able to match the Street expectations and thus all eyes are now waiting to check out the first quarter results of the 2015 fiscal year. Let’s quickly check into the financial playbook of the chipset honcho and find out what could be expected from the first quarter earnings report.

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Looking into the past quarter review

The last quarter of 2014 was rather disappointing for the tech company with revenue of $6.69 billion which clearly missed the analysts’ estimates of $7.01 billion. In the past quarter the revenue did however rise 3% year over year, though it dropped 2% sequentially. On similar lines, the net income came in as $2.14 billion in the last quarter, which was down 13% sequentially but was up 18% when compared on a yearly basis.

Though the company missed the analysts’ estimates, the management seemed content with the fourth-quarter results. As the 3G/4G LTE growth is expected to be phenomenal in the years ahead, Qualcomm believes that it has a promising future in China despite the challenges it faces due to the investigation by Chinese regulators. In fact the ongoing investigation by the Chinese regulator, National Development and Reform Commission (NDRC) since November 2013, has been affecting the chip maker’s reputation and to some extent its financial performance which has been reflected in its not so lucrative performance in the past quarter.

Flagship processor and newer technologies in 2015

The Snapdragon 810 has been the most awaited chip processor by several smartphone giants who were interested to better the speed of their mobile devices to improve their sales in the smartphone market.

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For Qualcomm, 73% of its total revenue for the fourth quarter of fiscal year 2014 came in from the integrated circuits and software division. The company presently has a dominant position in the chip industry and has a competitive edge of spreading its fixed costs over other units.

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At the CES 2015, Qualcomm’s keynote presentation was more than just a presentation where the company gave a heads up on its future expansion plans and mentioned that more of its chips would travel outside the smartphone market. It also elaborated its plans on widening its market base by focusing more on WiFi infrastructure in 2015 and beyond.

Stepping into 2015, Qualcomm has been successful in launching the fifth generation of its LTE modem. The Snapdragon 810 would be powering the next-gen smartphones of HTC, Samsung Electronics (SSNLF, Financial) and Sony Corp (SNE, Financial). Though there were rumors of the processor deliveries being delayed due to some issues concerning its speed and overheating, Qualcomm’s management have been quick to confirm the timely delivery schedule.

Over the course of Qualcomm’s history it has invested nearly $33 billion in R&D. It has always anticipated industry trends and has made its fundamental investments for driving the industry forward. Therefore, at the CES 2015, it unwrapped a new technology it’s about to bring into cars- it showcased a Cadillac XTS sedan that operates on Snapdragon on the Android operating system and also includes wireless charging LTE broadcasting and hotspots.

Final thoughts

Taking insight from the future highlights offered by Qualcomm beginning this year, 25 analysts of Bloomberg have rated the stock as Buy, 14 recommended it as Hold and only 1 advocated a Sell on the stock. In fact, a lot is yet to be revealed the coming Wednesday when the company’s first quarter results of 2015 give more information on the financial stability of Qualcomm. Let’s stay tuned to find out whether the new tech achievements of Qualcomm aid in improving its top and bottom line in the first quarter and whether it provides a better idea on the future outlook of the chipmaker.