Qualcomm’s first-quarter income was cut in half by heavy losses in its investment portfolio, and a weak economic outlook prompted the company to slash its year-out revenue guidance.
The chip maker reported a 56 percent decline in its first-quarter net income and posted a charge of $388 million on losses in marketable securities. The company warned it has $1.1 billion in unrealized investment losses between Dec. 28 and Jan. 23 and may post further charges if the stock market does not improve.
Qualcomm said the worldwide economic slowdown is causing handset manufacturers to keep their chipset inventories low, resulting in weakening demand for its CDMA-based MSM integrated circuits. The company expects conditions to remain soft until the second half of fiscal year 2009, when it expects to see a rise in demand from emerging markets like China.
“While our operating performance was strong, the distress in the global financial markets continued, resulting in additional impairments of our marketable securities portfolio,” said CEO Paul Jacobs in a statement.
The company’s first-quarter net income fell 56 percent to $341 million, or 20 cents a share, from $767 million, or 46 cents a share from the same period last year.
Revenue was a bit rosier, coming in at $2.52 billion, a 3 percent increase over last year’s figure of $2.44 billion. The company posted an operating cash flow of $3.5 billion, including $2.5 billion received from Nokia last October for new license and settlement agreements.
Citing ongoing turmoil in the financial markets, the company did not give out earnings per share guidance for the upcoming year and cut its previous guidance for fiscal year 2009 to a range of $9.3 billion to $9.8 billion, down from the $10.2 billion to $10.8 billion it predicted in November.
“The CDMA inventory channel has contracted as we expected, and the business environment continues to remain uncertain. Reduced visibility in the marketplace makes it difficult to forecast future inventory levels or predict when a recovery will begin. As a result, while we continue to estimate healthy growth in the CDMA-device market, we have lowered our shipment estimate for calendar year 2009,” Jacobs said.
Qualcomm is not the only company in the industry suffering from weakening demand and turmoil in the financial markets. Rival Texas Instruments announced Monday it would cut 12 percent of its workforce, or 3,400 jobs, after posting steep declines in its fourth-quarter income and revenue.
Qualcomm outsources much of its manufacturing and does not expect widespread layoffs, said CFO Bill Keitel in an interview with Reuters.
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