Shares of communications technology bellwether Qualcomm (QCOM 55.17, +1.71) trade about 3.2% higher this afternoon as last night’s Q4 earnings and revenue beat outshines the somewhat tepid Q1 guidance. The San Diego-based technology firm has been the subject of some recent reports suggesting its components would not be used in some upcoming iterations of Apple’s (AAPL 166.57, -0.32 -0.19%) iPhone and iPad products, a notion management attempted to quash on the conference call.
Qualcomm is perhaps best known as a supplier to the aforementioned Apple in its handheld devices. As of now, QCOM has supplied AAPL with the 28nanometer chipset for previous iPhone 5, 5S and 6 models as well as the 20nm chip used in the iPhone 6S. Due mostly to disputes regarding royalties AAPL deems unfair as well as claims Apple is due $1 billion in back-rebates, the two parties have been locked in a licensing dispute since the beginning of the calendar year. The dispute has occurred with a backdrop that QCOM competitor Intel (INTC 46.34, -0.37 -0.79%) has also been supplying AAPL with chipsets over recent years, alongside QCOM.
Turning to the results, QCOM reported better than expected Q4 earnings of $0.92 per share on revenue declines of 3.5% compared to last year to $5.96 billion, yet still beating market views.
Revenues from the company’s Qualcomm CDMA Technologies (QCT) segment were up 13% versus last year to about $4.65 billion. The segment supplies software and integrated circuits on code-division multiple access (CDMA), which is basically a method whereby communication is possible from several transmitters over a single communication channel. The technology is the QCOM standard, and is used along OFDMA for wireless communication across mobile/handheld devices. Further, QCOM’s Mobile Station Modem (MSM) chip shipments in the segment increased 4% compared to a year ago, and 18% sequentially, to 220 million units.
As for the company’s Qualcomm Technology Licensing (QTL) segment, revenues slipped 36% to about $1.21 billion in the quarter. The segment holds the majority of QCOM’s patent portfolio and registers revenues through licensing deals – namely, with device manufacturers like Apple.
As a result of the ongoing dispute with Apple, QCOM will continue to exclude revenues recognized from the sale of Apple’s products and other disputed licenses.
As such, the company’s Q1 guidance is in-line on both the top and bottom lines; the company expects Q1 earnings of $0.85-0.95 per share on revenues between $5.5-6.3 billion.
QCOM also commented on its yet-to-be-approved deal with NXP Semiconductor (NXPI 116.69, -0.61 -0.52%). In recent months, European antitrust officials have taken a closer look at the QCOM/NXP deal related to concerns that it may potentially be anti-competitive toward competitors. All indications ahead of the Q4 report were that the deal would conclude before the end of the calendar year. QCOM management commented that, while this expectation still holds, the company floated that the deal may in fact close in early 2018.