Updated from 1:47 p.m. to include additional information about Qualcomm's issues in China in the eighth paragraph.
NEW YORK, NY (TheStreet) -- Qualcomm (QCOM) told analysts Wednesday the company's five-year compound annual growth rate (CAGR) will be between 8% and 10% per year with earnings per share growing at a faster clip, as the company benefits from the continued expansion and the global shift to LTE (Long Term Evolution) or 4G wireless networks, with new opportunities around connected devices.
At Qualcomm's Wednesday analyst meeting at the Grand Hyatt in New York, CEO Steven Mollenkopf said top and bottom line growth will be driven by its core smartphone business with support from new businesses in adjacent markets such as automotive and wearables.
The semiconductor company's guidance provides a long-term view beyond the fiscal 2015 first quarter, in which it had previously said it anticipates between $6.6 billion and $7.2 billion in revenue. Full year revenue guidance falls between $26.8 billion and 28.8 billion and earnings per share of between $5.05 and $5.35, with the midpoint coming in below where it finished 2014. In 2015, "unit growth is going to trump ASP decline again," Chief Financial George Davis said.
Qualcomm shares closed lower in Wednesday trading, falling 2.1% to $70.47.
Looking ahead at market dynamics, the company said it expects the global 3G/4G handset replacement rate to dip slightly to 30% in the 2015 calendar year, versus 31% for 2014. It also anticipates global 3G/4G device shipments to grow by a CAGR of 15% over the next five years, with a majority of growth coming from emerging markets such as Latin America, Eastern Europe, India, and China.
The bad news is that the average selling price (ASP) for devices is expected to decline further, and was already down 6% in fiscal year 2014. Qualcomm President Derek Aberle said he expects a 9% to 10% erosion in ASPs for its fiscal year 2015, which is faster than previously anticipated, in part because of growing demand in emerging markets and competition among Chinese manufacturers that are driving prices lower. The decline, however, will be less severe in 2016 and beyond, with ASPs dipping by low to mid single-digit percent on an annual basis.
On the China front, Qualcomm eyes continued growth in handset sales and demand for LTE technology in the region. Qualcomm Technologies Executive Vice President Cristiano Amon noted that the CAGR of Chinese OEM handset exports is expected to grow by 30% between 2007 and 2013, meaning the company seeks to capitalize on that growth with its Snapdragon chips.
The San Diego-based company also recently unveiled that it is under investigation from the Federal Trade Commission for investigating the company's patent licensing business. Qualcomm charges cellphone makers a percentage of the price of their products for use of the company's patents, in addition to selling chips for mobile devices, a practice that the FTC is looking into. In the past, Qualcomm has had to pay fines based on charging too much and acting like a monopoly, paying more than $200 million to South Korea in 2009.
During its most recent quarter, Qualcomm's licensing business took a hit as a result of its issues in China, and both revenue of $6.7 billion and profit disappointed market consensus. Shares are down more than 8% since the fourth-quarter fiscal year 2014 report.
--Written by Jennifer Van Grove in New York, NY.
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