Qualcomm Expands Licensing Deal With Samsung as Charges Cut Into Profit -- 2nd Update
January 31 2018 - 6:06PM
Dow Jones News
By Austen Hufford and Ted Greenwald
Qualcomm Inc. entered into an expanded deal with one of its
biggest customers and beat revenue estimates in its latest quarter
even as it swung to a deep loss.
Qualcomm said Wednesday that it had reached a multiyear deal
with Samsung Electronics Co. that covers various areas including
mobile devices. In addition, it said Samsung had agreed to withdraw
its support for regulatory actions against Qualcomm in South Korea
and elsewhere, a shift that could give it leverage as it appeals
fines brought against it in recent years.
The agreement with Samsung, which allows the two companies to
share patents, doesn't bear on the agreements Qualcomm uses to
license intellectual property for its smartphone chips, which are
facing legal challenges by Apple Inc. and international regulators.
However, the new contract is "consistent with Qualcomm's global
handset-level licensing practices," which are among Qualcomm's
business practices that have been under fire.
Qualcomm charges its chip customers royalties based on a
percentage of the price of a whole smartphone rather than its
chips. Both Samsung and Apple were responsible for more than 10% of
Qualcomm revenue in the company's last fiscal year.
In its fiscal first quarter, Qualcomm took a $6 billion charge
related to the new U.S. tax law and a $1.2 billion charge for a
fine imposed by the European Commission, which claimed that
payments made to Apple to entice it to exclusively use Qualcomm
chips were anticompetitive.
The company posted a loss of $6.07 billion, or $4.03 a share,
compared with a profit of $700 million, or 46 cents a share, in the
same period a year earlier. On an adjusted basis, which takes out
the charges, the company brought in 98 cents a share, above the 91
cents analysts polled by Thomson Reuters had expected.
Shares fell 0.4% to $68 in after-hours trading.
The chip maker, facing a hostile takeover bid by Broadcom Ltd.
and continuing attacks on its business model from customers and
regulators, told investors in a recent presentation that it could
boost profit by fiscal 2019.
Qualcomm also said its proposed deal to buy NXP Semiconductors
NV for $39 billion should close in early 2018. The companies
originally announced the deal in October 2016.
In all, revenue rose 1.2% to $6.07 billion, above Wall Street
estimates of $5.93 billion. For its current quarter, Qualcomm
expects revenue of $4.8 billion to $5.6 billion and adjusted
earnings per share of 65 cents to 75 cents.
Analysts had expected revenue for the second quarter of $5.58
billion and adjusted earnings per share of 85 cents.
Qualcomm is one of the largest providers of communications chips
for smartphones, and its products form the heart of many higher-end
phones. As a holder of patents essential to implementing cellular
standards, Qualcomm collects royalties on many smartphones sold
world-wide, regardless of whether they include the company's
chips.
However, Apple has been blocking royalty payments while it
pursues court cases alleging Qualcomm engages in unfair practices.
Revenue from licensing intellectual property, which typically
contributes significantly to Qualcomm's earnings, fell 27%.
Chip shipments rose 9% in the quarter as chip revenue rose 13%
to $4.65 billion.
Qualcomm expects global shipments of 3G and 4G devices in 2018
to rise 7%, coming in between 1.85 billion and 1.95 billion.
Write to Austen Hufford at austen.hufford@wsj.com and Ted
Greenwald at Ted.Greenwald@wsj.com
(END) Dow Jones Newswires
January 31, 2018 18:51 ET (23:51 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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