At Qualcomm, Investors Watch for a $44 Billion Merger or a Buyback -- Earnings Preview
25 Luglio 2018 - 11:59AM
Dow Jones News
By Micah Maidenberg
Qualcomm Inc. is scheduled to announce its fiscal third-quarter
earnings Wednesday after the market closes.
EARNINGS FORECAST: Qualcomm is expected to report 71 cents a
share in profit, excluding share-based compensation and other
costs, according to analysts polled by FactSet. A year ago, the
company reported an adjusted profit of 83 cents a share.
REVENUE FORECAST: Analysts expect sales of $5.19 billion, down
3.4% from last year.
WHAT TO WATCH:
DEADLINE DAY: The main issue on investors' minds is whether
China's competition authorities will greenlight Qualcomm's $44
billion bid to acquire Dutch automotive chipmaker NXP
Semiconductors. Qualcomm's deal to buy NXP expires Wednesday, the
same day the company reports earnings. If Chinese authorities
haven't approved the acquisition by then, Qualcomm plans to walk
away rather than extend the agreement--a move that would put the
chip maker on the hook to pay a $2 billion fee to NXP. Qualcomm in
April said if the deal doesn't pass, the company would move quickly
on buying back $20 billion to $30 billion of its stock. Be it a
merger or share repurchases, "both scenarios are likely near-term
positives for the stock," said Rick Schafer, an analyst at
Oppenheimer. But Mr. Schafer added that a buyback wouldn't offer a
broader change in the company's strategic direction.
CUSTOMER BATTLES: Qualcomm remains locked in disputes with
smartphone makers, including Apple Inc., over how it structures
royalty payments in its contracts. The dispute has cost Qualcomm
billions and investors will be listening for any sign of an end to
the disputes. In March, The Wall Street Journal reported that
Qualcomm and Huawei Technologies Co. were in settlement talks.
Qualcomm also has sued Apple in Germany, China and the U.S. for
allegedly infringing on its patents. Vijay Rakesh, an analyst at
Mizuho Securities USA, pointed out in a research note that German
courts may issue precedent-setting rulings next quarter.
FUNDAMENTALS: Qualcomm also faces questions about how the
company will diversify beyond chips for smartphones - especially if
the NXP deal doesn't go through. Last year, for example, the San
Diego-based chip maker created a joint venture with Japanese
electronics firm TDK Corp. to create components for the auto sector
and the Internet of Things, the name given to the wide range of
household and other items that are connected online. Qualcomm has
been playing up its leadership in the next generation of cellular
technology, known as 5G. Investors will want to know more about the
company's diversification strategy. "Smartphones are not the big
growth market they used to be," Bernstein analyst Stacy Rasgon
said.
Write to Micah Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
July 25, 2018 05:44 ET (09:44 GMT)
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