Qualcomm jumps on fiscal Q3 beat; chip sales and Chinese royalties strong

Whereas Intel went into its earnings report near a 52-week high, Qualcomm(QCOM) - Get Report went into its report soundly below a 52-week high of $64.97, and even further below a 2014 peak of $81.97. As a result, shares are flying higher after a healthy fiscal third quarter beat, even though fourth quarter guidance -- revenue of $5.4 billion to $6.2 billion and earnings per share of $1.05 to $1.15 -- is only a little above mean estimates of $5.73 billion and $1.08 at the midpoints. There may have been fears of weaker Q4 guidance due to Apple's reported plans to use Intel modems within some iPhone 7 units, after years of solely relying on Qualcomm.

Qualcomm's MSM baseband modem and app processor shipments totaled 201 million in the third quarter -- down 11% annually, but above guidance of 175 million to 195 million. In addition, licensing deals with Chinese vendors helped reported device sales -- on which Qualcomm collects royalties -- rise 4% to $62.6 billion, beating guidance of $52 billion to $60 billion. MSM shipments are expected to total 195 million to 215 million in the fourth quarter, with reported device sales of $57 billion to $65 billion.

Healthy sales of Qualcomm's high-end Snapdragon 820 processor to Samsung and others are boosting both chip shipments and average selling prices. Qualcomm is also benefiting from rising sales to Chinese vendors, many of whom have been relying heavily on aggressively-priced chipsets from Qualcomm rivals MediaTek and Spreadtrum. And job cuts helped the chip division's operating profit rise 26% to $365 million, despite flat revenue of $3.85 billion.

Qualcomm still faces some major challenges, such as stiffening 4G modem competition and a stagnating high-end smartphone market that's weighing on both chip sales and -- since royalties are based on a percentage of a phone's sale price -- licensing revenue. But the company's third quarter numbers put to rest a lot of the worst-case scenarios imagined for the company, at least for now.

In Thursday morning pre-market trading, Qualcomm shares were spiking up 7.7% to $60.10.

Intel drops after mixed results and guidance reiteration; server CPU growth disappoints

At first glance, Intel's (INTC) - Get ReportQ2 report looks pretty solid. The chip giant slightly missed revenue estimates, but beat EPS estimates thanks to a 61.8% gross margin (better than a guidance midpoint of 61%) and a 4% sequential drop in operating expenses (the result of job cuts).

In addition, third quarter revenue guidance of between $14.4 billion and $15.4 billion compares favorably with a $14.63 billion mean estimate at the midpoint -- a moderate improvement in PC sales and iPhone modem sales to Apple are probably helping -- and the company reiterated full-year guidance for mid-single digit revenue growth and a 62% gross margin, give or take 2%.

But Intel's Data Center Group (DCG), which supplies server CPUs (among other things) and has long been trumpeted as the company's long-term growth engine as PC sales remain weak, only saw revenue grow 5% annually to $4.03 billion. That's a slowdown from Q1's 9% growth, and is well short of the 15% compound annual growth rate (CAGR) Intel has been targeting for that business from 2014-2018. DCG also saw its operating profit drop 4% to $1.77 billion.

The DCG figures suggest booming sales to major web/cloud service providers such as Google, Facebook and Amazon are being offset to a large extent by declining enterprise server CPU sales, as workloads continue migrating to the cloud. They also come amid speculation Intel is pricing aggressively to discourage cloud providers from considering CPUs based on ARM Holdings' CPU core designs.

Shares of Mellanox (MLNX) - Get Report , whose high-speed server connectivity hardware often goes into Intel-powered systems, were sharply lower during Thursday's trading session, but TheStreet.com's quantitative service upgraded the stock.

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TheStreet's technical analyst Bruce Kamich shows in this daily chart of MLNX above that the stock just filled an old gap from April before reversing directions. MLNX tested the rising 50-day and 200-day moving averages while the daily On-Balance-Volume (OBV) line had turned lower. There is a bearish divergence in June and July between the higher highs in price but the lower highs from the 12-day momentum study. Momentum was weaker on the second rally. 

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In this weekly chart of MLNX, above, he shows that prices are above the rising 40-week moving average line, but this week's price action has not been posted. Kamich says further weakness on Friday could lead to a close below the 40-week average line. The weekly OBV line is pointed up but he says that too could change on tomorrow's close. "The Moving Average Convergence Divergence (MACD) oscillator is barely above the zero line and could cross again to a new sell signal, depending on the price action," reports Kamich.

According to Kamich, a close below $46 is likely to weaken the chart of MLNX despite the quantitative upgrade.

On the bright side, Intel's Client Computing Group (CCG), which supplies PC and mobile CPUs, only saw a 3% revenue drop in spite of a weak PC market and a 49% drop in tablet processor volumes. A 13% increase in average selling price (ASP) -- driven in large part by tablets, but also to an extent by PCs -- offset a 15% drop in unit volumes.

Elsewhere, Intel's Security Group, which is reportedly on the block, saw revenue rise 10% to $537 million; that might ultimately give a boost to the unit's sale price. The Internet of Things Group, which supplies embedded processors, delivered a 2% increase in sales to $572 million. And the Programmable Solutions Group, the product of Intel's $16.7 billion purchase of FPGA chipmaker Altera, posted revenue of $465 million, up 12% from what Altera reported as an independent company a year ago. The Non-Volatile Memory Solutions Group was a weak spot, with sales dropping 20% to $554 million amid NAND flash memory price declines and tough competition from Samsung; Intel NAND partner Micron reported soft NAND figures three weeks ago.

With Intel having made a fresh 52-week high on Wednesday ahead of earnings, there wasn't much room for error. Its Data Center Group's second-half performance is bound to be closely watched in the wake of the second-quarter numbers.

In Thursday morning pre-market trading, Intel shares were down 3.3% to $34.51.

Facebook Messenger tops 1 billion monthly active users

Mark Zuckerberg once said Facebook(FB) - Get Report won't get serious about monetizing Messenger until it surpasses 1 billion users. Well, we're here. Three months after surpassing 900 million monthly active users (MAUs) and less than two years after hitting 500 million, the messaging app supporting Facebook's core services has a 10-figure user base.

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WhatsApp, which Facebook spent over $21 billion to buy in 2014, topped 1 billion MAUs in early 2016. Tencent's WeChat, dominant in China, is the largest third-party messaging app, with 762 million MAUs as of June. Analytics firm SensorTower reports Messenger's downloads rose 10% sequentially in the second quarter, with the growth fueled by international Android app downloads.

Facebook also says Messenger now handles 17 billion photos and 1 billion messages between people and businesses each month, not to mention 10% of the world's voice-over-IP calls. This year has seen Messenger launch an AI-powered chatbot platform -- it now supports 18,000 chatbots -- as well as add SMS support to its Android app and revamp its interface to make contacts and content easier to find. Messenger ads are in test mode.

Facebook shares were up 0.2% to $122.20 in Thursday morning pre-market trading.