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Qualcomm Misses Analyst Expectations, Weakens Outlook

Qualcomm (NASDAQ:QCOM) reported their earnings for their fiscal fourth quarter of 2014, calendar Q3 2014 as well as the whole fiscal year of 2014 which ends in the calendar third quarter of every year. Qualcomm reported profits of $1.89 billion on $6.69 billion in revenue which boils down to an EPS of $1.11. Qualcomm’s revenues were up 3% year over year and down 2% from the last quarter, which worries some investors. Additionally, Qualcomm’s profit was up 26% year over year, but down 15% from the previous quarter.

However, Qualcomm’s quarterly figures missed on both revenue and non-GAAP EPS based on analysts’ expectations. Analysts had a consensus prediction of $1.31 EPS, which Qualcomm missed by $0.05 and they had a revenue target of $7.03 billion, and Qualcomm missed on that as well by $330 million.

Qualcomm also reported their results for the whole fiscal 2014 year, which showed the company as reporting $26.49 billion in revenue and a non-GAAP EPS of $5.27 while shippin 861 million MSM chips globally, an absolutely crazy number of SoCs. And if you take into account that

The primary problems that Qualcomm has right now is that they have a very strong position in the mobile market and are the leading SoC and baseband vendor for almost all of the leading smartphone vendors. In many regions, this has made Qualcomm very profitable and helped them grow to the $26 billion a year company that they are. They also managed to generate $8 billion in profit over the course of the last year, which is up from $6.8 billion in the previous fiscal year, a pretty significant improvement by any measure.

However, Qualcomm’s situation in China appears to be worsening rather than improving. They have plenty of products and IP that Chinese OEMs wish to utilize in their products, but are having a hard time getting them to properly license those technologies and pay for/accurately report how many Qualcomm licensed devices they are shipping and for how much. Additionally, Qualcomm is being probed by the Chinese government for the very reason that they are not Chinese and they are very present in the Chinese market. This very likely has to do with the fact that many large western companies have been probed in China recently and is a mere political move by the Chinese government to get more foreign technological investment.

Qualcomm’s outlook for the fiscal year of 2015 is what really drove Qualcomm’s stock downward today on yesterday’s news, with the company expecting revenues of $26.8 billion to $28.8 billion and an EPS of $5.05 to $5.35 which is below the consensus estimates of $28.9B and $5.58. The stock fell a whopping 8.5% today in regular trading after losing 6% in after hours trading yesterday and continues to lose ground into after hours trading, slipping an additional 2%. At the time of publication, Qualcomm’s stock is at $69.19 which is significantly lower than the $77 it was trading at before earnings were announced yesterday. As we learned in the case of Samsung, and now Qualcomm, nobody is invincible.