NEW YORK (TheStreet) -- Shares of Qualcomm (QCOM) are down 0.39% to $75.32 after it was reported that the settlement of China's anti-trust probe is likely to intensify global scrutiny of the firm's highly profitable patent licensing business, and may even call into question its worldwide contracts with smartphone makers such as Apple (AAPL) and Samsung (SSNLF) , Reuters reports.
China's National Development and Reform Commission is moving to wrap up its 13-month investigation into the U.S. chipmaker as soon as possible, the regulator said in a statement on Friday, bringing to an end one of the most high profile of a slew of such investigations by Beijing into western firms, Reuters said.
Any deal is likely to include a record-breaking fine, as well as changes to how Qualcomm licenses its technology to handset makers in China, according to Reuters industry sources and local press reports.
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That could weaken the firm's prized technology-licensing business across the global smartphone industry by increasing pressure from regulators in other countries. Anti-trust probes in Europe and by the FTC may be related to China's investigation, Qualcomm has said, Reuters noted.
"It's not an overstatement to say they're under attack," Thomas Cotter, a patent expert and professor at the University of Minnesota Law School told Reuters. "Nobody knows how it will play out but the fact that there is an FTC investigation tells you something."
Qualcomm had no comment.
TheStreet Ratings team rates QUALCOMM INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate QUALCOMM INC (QCOM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, expanding profit margins, growth in earnings per share and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- QCOM's revenue growth has slightly outpaced the industry average of 5.5%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Communications Equipment industry and the overall market, QUALCOMM INC's return on equity exceeds that of both the industry average and the S&P 500.
- The gross profit margin for QUALCOMM INC is rather high; currently it is at 64.21%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 28.30% is above that of the industry average.
- QUALCOMM INC has improved earnings per share by 29.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, QUALCOMM INC increased its bottom line by earning $4.40 versus $3.91 in the prior year. This year, the market expects an improvement in earnings ($5.20 versus $4.40).
- The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Communications Equipment industry average. The net income increased by 26.2% when compared to the same quarter one year prior, rising from $1,501.00 million to $1,894.00 million.
- You can view the full analysis from the report here: QCOM Ratings Report