The Latest Earnings Show Why Qualcomm and Skyworks Are Hungry to Diversify

Plenty has been written on the various product and cost synergies Qualcomm  (QCOM) stands to reap from its pending $47 billion acquisition of Dutch chip giant NXP Semiconductor (NXPI) as well as about how the deal gives Qualcomm exposure to growing automotive and IoT chip markets. But the extent to which the purchase was a defensive move, one meant to lower Qualcomm's exposure to a mobile device market where slow growth and some company-specific factors stand to be long-term headwinds, can't be overlooked.

A fresh batch of earnings reports, courtesy of Qualcomm and mobile chip peers Skyworks (SWKS) and Qorvo (QRVO) , arguably help show why Qualcomm was so keen to diversify. And why Skyworks, reported this week to have approached analog, networking and storage chip maker Microsemi (MSCC)  about a possible buyout, may be looking to do the same.

With job cuts, new Chinese licensing deals and a higher mobile processor share at Samsung providing boosts, Qualcomm recently reported fiscal Q4 (September quarter) revenue of $6.18 billion (up 13% annually) and adjusted EPS of $1.28, topping consensus analyst estimates of $5.84 billion and $1.13. But Q1 guidance was more subdued: Revenue of $5.7 billion to $6.5 billion (down 1% to up 13%) and EPS of $1.12 to $1.22 versus a consensus of $6.15 billion and $1.22.

Qualcomm also guided for its MSM processor and modem shipments, which are pressured by Apple's decision to partly use Intel modems within the iPhone 7, to drop 7% to 15% to a range of 205 million to 225 million. And reported sales of 3G/4G devices on which Qualcomm collects royalties are expected to be in a range of $58 billion to $66 billion (down 4% to up 9%).

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