UPDATE: Qualcomm (QCOM) Tops Q1 EPS by 8c, FY Guidance Misses Views

(Updated - January 28, 2015 4:17 PM EST)

Qualcomm (NASDAQ: QCOM) reported Q1 EPS of $1.34, $0.08 better than the analyst estimate of $1.26. Revenue for the quarter came in at $7.1 billion versus the consensus estimate of $6.93 billion.

First Quarter Results (GAAP)*
	Q1 Fiscal2015		Q1 Fiscal2014		Year-Over-YearChange		Q4 Fiscal2014		SequentialChange
Revenues 1	$7.1B		$6.6B		+7%		$6.7B		+6%
Operating income 1	$2.1B		$1.5B		+38%		$2.0B		+4%
Net income 2	$2.0B		$1.9B		+5%		$1.9B		+4%
Diluted earnings per share 2	$1.17		$1.09		+7%		$1.11		+5%

Business Outlook

The following statements are forward looking, and actual results may differ materially. The "Note Regarding Forward-Looking Statements" in this news release provides a description of certain risks that we face, and our most recent annual and quarterly reports on file with the Securities and Exchange Commission (SEC) provide a more complete description of risks.

Our outlook does not include provisions for future asset impairments or for pending legal matters, other than future legal amounts that are probable and estimable. Further, due to their nature, certain income and expense items, such as realized investment and certain derivative gains or losses, cannot be accurately forecast. Accordingly, we only include such items in our financial outlook to the extent they are reasonably certain; however, actual results may differ materially from the outlook.

We have lowered our outlook for the second half of fiscal 2015 in our semiconductor business, QCT, largely driven by the effects of:

• A shift in share among OEMs at the premium tier, which has reduced our near-term opportunity for sales of our integrated Snapdragon™ processors and has skewed our product mix towards more modem chipsets in this tier;
• Expectations that our Snapdragon 810 processor will not be in the upcoming design cycle of a large customer's flagship device; and
• Heightened competition in China.

China continues to present significant opportunities for us, particularly with the rollout of 3G/4G LTE multimode, but also presents significant challenges, as our business practices continue to be the subject of an investigation by the China National Development and Reform Commission (NDRC). Please refer to our Quarterly Report on Form 10-Q for the first quarter ended December 28, 2014 filed with the SEC for our most recent disclosures regarding the NDRC investigation.

Our current outlook for our licensing business, QTL, reflects the following:

• We resolved the previously disclosed dispute with a licensee in China in the first quarter of fiscal 2015. However, we continue to believe that certain licensees in China are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes certain licensees underreporting a portion of their 3G/4G device sales) and that unlicensed companies may seek to delay execution of new licenses while the NDRC investigation is ongoing. We are taking steps to address these issues, although the outcome and timing of any resolutions are uncertain.
• We expect global 3G/4G device shipments to be approximately 1.35 billion for calendar year 2014. However, due to the issues described above, we do not believe that all of the global 3G/4G device shipments for calendar year 2014 will be reported to us within the time periods required by our license agreements. Accordingly, we currently estimate approximately 1.135 billion to 1.175 billion calendar year 2014 3G/4G device shipments will actually be reported to us through the first calendar quarter of 2015.
• We expect global 3G/4G device shipments to be approximately 1.5 billion to 1.6 billion for calendar year 2015. At this time, we are not providing a forecast for calendar year 2015 reported 3G/4G device shipments.
• In the following table, we do provide guidance for estimated second fiscal quarter and fiscal 2015 3G/4G total reported device sales. That guidance includes an estimate of some prior period activity (i.e., devices shipped in prior periods) that may be reported to us.

Our outlook for fiscal 2015 includes an estimate of the benefit related to stock repurchases that we plan to complete over the remainder of fiscal 2015 under our current stock repurchase program.

We have not included any estimates related to the proposed acquisition of CSR plc in our fiscal 2015 outlook. The acquisition is expected to close by the end of the summer of 2015. We expect the acquisition to be accretive to Non-GAAP earnings per share in fiscal 2016, the first full year of combined operations.

Qualcomm sees Q2 2015 EPS of $1.28-$1.40, versus the consensus of $1.28. Qualcomm sees Q2 2015 revenue of $6.5-7.1 million, versus the consensus of $6.74 million.

Qualcomm sees FY EPS of $4.75-5.05 vs prior guidance of $5.05-$5.35 and the consensus of $5.21. Qualcomm sees FY revenue of $26.0B - $28.0B vs prior guidance of $26.8B - $28.8B and the consensus of $27.81 billion).

For earnings history and earnings-related data on Qualcomm (QCOM) click here.

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