Qualcomm Q1: Outlook chopped after losing major Snapdragon 810 customer

Qualcomm's earnings beat the Street, but difficulty in China and the loss of a major customer forced the semiconductor maker to lower its outlook.
Written by Natalie Gagliordi, Contributor

Qualcomm reported its first quarter earnings and revenue Wednesday after the bell, and although the results were higher than expected, a softened outlook took a toll on the company's shares.

Qualcomm CEO Steve Mollenkopf highlighted the company's resolved dispute with a licensee in China, however the positivity stopped there.

Mollenkopf said Qualcomm has lowered its revenue outlook of its semiconductor business for the second half of fiscal 2015, as well as its earnings expectations:

We delivered a strong quarter, achieving record quarterly revenues and Non-GAAP operating income, and we also are very pleased to have resolved our previously disclosed dispute with a licensee in China. Looking ahead, we have lowered our revenue outlook for our semiconductor business for the second half of the fiscal year and lowered our EPS expectations. These changes reflect our revised expectations related to OEM mix, sales to a large customer and heightened competition in China.

As a result, Qualcomm shares tumbled more than 6 percent in after-hours trading.

The bit in Mollenkopf's statement about "sales to a large customer" refers to the company's Snapdragon 810 processor, which was apparently dropped from the upcoming design cycle of a large customer's flagship device. No other specifics were given.

As for Qualcomm's China issues, they seem to be a recurring theme for the San Diego-headquartered corporation. And according to language in its earnings release, the there is no immediate resolution:

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.

In terms of Q1 numbers, the global semiconductor business reported a net income of $2.0 billion, or $1.17 per share (statement).

Non-GAAP earnings were $1.34 per share on a revenue of $7.1 billion, up 7 percent annually and 6 percent sequentially.

Wall Street was expecting Qualcomm to deliver earnings of $1.26 per share and revenue of $6.62 billion.

For the current quarter, Qualcomm said it expects overall company revenue of between $6.5 billion to $7.1 billion, with earnings per share of approximately $1.28 to $1.40. Analysts were expecting EPS of $1.28 and revenue of $6.74 billion.

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