Even with a global slowdown in wireless infrastructure demand,
reported it exceeded top line estimates, and pared down losses on a year-on-year basis.
Shares of the company plunged some 12% today after UBS Warburg downgraded its rating to hold from buy on concerns of a weakened demand for wireless chips. Qualcomm manufactures chips for Code Division Multiple Access, or CDMA technology. In the U.S.,
systems are based on Qualcomm technology.
"Concerns over lower-than-expected industry volumes this year, in conjunction with the need to deplete excess chipset channel inventory in the Sept. and Dec. quarter, will likely limit upside to our estimates," wrote UBS Warburn analyst Jeffrey Schlesinger, who also cut the company's target price to $32 from $38. He also said the environment for CDMA technology means that Qualcomm is likely to warn over the next couple of quarters.
Qualcomm has said on previous occasions that it expects to ship 80 million to 85 million CDMA units. But with the overall reduced guidance from carriers in the nation -- including Sprint PCS' recent conservative estimates, given the current hostile market for all things wireless.
Qualcomm reported net losses for its fiscal third quarter 2002 of $14 million, or a 2 cents a share loss, compared to a loss per share of 26 cents in the year-ago quarter. Losses under generally accepted accounting practices were due to a $194 million charge related to a market value decline in
securities. Revenue for the quarter was $771 million, compared to $657 million in the year ago period.
Excluding charges, the company reported pro forma earnings of 24 cents a share, compared to 20 cents a share in the year-ago quarter. Pro forma net revenue of $721 million, a 10% jump year-over-year from $657 million, and a 9% sequential gain from $659 in the prior quarter. Wall Street expected the company to report earnings of 22 cents, on revenue of $696.50 million, according to a survey from Thomson Financial/First Call.
"In today's environment where every capital expenditure dollar counts, we believe the combination of CDMA2000 1X network and BREW applications provides CDMA carriers clear economic and service quality advantages over competitors," said Qualcomm CEO Irwin Mark Jacobs in a prepared statement. He pointed to the increasing revenues as evidence that the demand for CDMA chips were rising as 3G networks begin to roll out across the globe.
Looking ahead, the company expects fourth quarter pro forma revenues to increase by 10% to 13%, compared to the third quarter. Fourth-quarter EPS will come in at 26 cents to 27 cents. Those estimates are based on the assumption that it will ship 18 million to 19 million MSM phone chips in the fourth quarter, including CDMA2000 1X chips, making up about 15 million of the estimates.