SAN DIEGO, CALIF. (TheStreet) -- Shares of Qualcomm (QCOM) were knocked down by more than 11% to $68.45 by Thursday afternoon after the semiconductor company reported fiscal year fourth quarter sales and profit that fell short of Wall Street's expectations, drawing further attention to its legal woes in China.
Qualcomm closed its fiscal year with revenue of $6.69 billion for the September quarter, up 3% year-over-year, but 5% less than the market consensus of $7.04 billion. The San Diego firm posted adjusted net income of $2.14 billion, which translated to non-GAAP earnings per share of $1.26, or 4% less than anticipated.
More troubling than the miss, however, was Qualcomm's disconcerting statements around unresolved troubles in China where its technology licensing business (QTL) is under investigation by the National Development and Reform Commission (NDRC). The legal trouble is hampering the company's ability to collect royalty payments in the country, and could lead to expensive fines and reduced royalties going forward.
"We now have signed more than 75 single mode LTE licenses with Chinese OEMs. Having said that, OEMs supplying a meaningful percentage of three-mode devices remain unlicensed," Qualcomm CEO Steven Mollenkopf cautioned during a conference call with analysts. "We remain in discussions with many of these OEMs, but the negotiations are being delayed, at least in part by the pending NDRC investigation."
As a result, the company lowered its fiscal 2015 guidance and freaked out Wall Street in the process. The low end, full year guidance of $240 billion in device sales and $26.8 billion in revenue, which respectively would represent a 1% decline and 1% improvement year over year, reflects the "status quo" in China, President Derek Aberle said. So, if there's a silver lining, it's that management is already factoring its China challenges into 2015 guidance, meaning hopefully no more earnings misses in the fiscal year ahead.
On the plus side, Qualcomm reported record MSM chip shipments of 236 million, up 24% over the year ago quarter, and forecasted MSM chip shipments for the December quarter of 250 million to 270 million. The company is also anticipated to benefit from the global shift to LTE. So despite the China woes, Qualcomm's otherwise fundamentally sound business seems to have most analysts optimistic about the company's long-term potential to route around this obstacle and return value to investors.
Here's what Wall Street analysts made of Qualcomm's complicated fiscal fourth quarter report: