What To Watch In QCOM's Earnings Report
Qualcomm (QCOM) is scheduled to report results of its fiscal third quarter after the market closes on July 31, with a conference call scheduled for 4:45 pm ET. What to watch for:
1. Q3 EPS CONSENSUS DOWN: Along with its last report, Qualcomm guided for Q3 adjusted earnings per share of 70c-80c on non-GAAP revenue of $4.7-$5.5B. At the time, analysts were expecting the company to report Q3 EPS of 87c on revenue of $5.08B, and while the consensus view for revenue remains unchanged, the EPS consensus view has since fallen to 75c. Additionally, the company said in its last report that it expects MSM chip shipments of 150M-170M in Q3, which would mark a 15%-25% year-over-year decline.
2. APPLE/INTEL: Last week, Qualcomm shares saw some pressure following a media report saying that Apple (AAPL) was in advanced talks to acquire Intel's (INTC) smartphone modem chip business for roughly $1B. Commenting on the talks, Roth Capital analyst Scott Searle said the move would address long speculated Apple intentions to vertically integrate within mobile devices and provide additional leverage in ongoing Qualcomm negotiations. The two companies confirmed the move last Thursday, saying that the $1B transaction is expected to close in the fourth quarter of 2019.
3. FTC ANTITRUST CASE: In late May, media reported that U.S. District Judge Lucy Koh in San Jose sided with the U.S. Federal Trade Commission in an antitrust case, ruling that Qualcomm suppressed competition in the market for cellphone chips and used its dominant position to exact "excessive" licensing fees. At the time, the company responded that it "strongly disagrees" with ruling and said it would immediately seek a stay of the judgement and an expedited appeal to the U.S. Court of Appeals for the 9th Circuit. As this legal saga continued, Reuters reported on June 20 that the FTC issued an objection to Qualcomm's legal push to introduce internal Apple documents as evidence to stop the enforcement of the antitrust ruling. Bloomberg reported earlier this month that Qualcomm had lost its bid to halt the ruling. Meanwhile, Reuters said in mid-July that the U.S. Justice Department had asked an appeals court to halt the enforcement of the ruling, citing backing from the Energy Department and Defense Department.
4. EU FINE: In other legal news, the European Commission announced on July 18 that it had fined Qualcomm EUR242M for "abusing its market dominance in 3G baseband chipsets." The company said in response that it would appeal the Commission's finding to the General Court of the European Union, saying it intends to "provide a financial guarantee in lieu of paying the fine while the appeal is pending."
Disclosure: None