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Qualcomm President Derek Aberle.

Qualcomm Profit Forecast Disappoints on Slowing Phone Demand

April 20, 2016
A drop in phone sales also hurts the chipmaker’s future licensing income, which it gets paid regardless of whether the handsets use its semiconductors

Qualcomm Inc., the biggest mobile-phone chip maker, forecast third-quarter sales and profit that may fall short of some analysts’ estimates, hurt by slowing demand in the market for high-end smartphones.

Revenue in the period that ends in June will be $5.2 billion to $6 billion, the company said Wednesday in a statement, and profit before certain items is projected to be 90 cents to $1 a share. Analysts on average had projected profit of 99 cents on sales of $5.51 billion, according to data compiled by Bloomberg.

Qualcomm, whose chips are the main component in the majority of the world’s most expensive smartphones, said demand for those devices was weaker than it expected at the start of the year. A drop in phone sales also hurts the chipmaker’s future licensing income, which it gets paid regardless of whether the handsets use its semiconductors, according to Mike Walkley, an analyst at Canaccord Genuity Inc.

“The end market’s probably shrinking year over year,” said the analyst, who recommends buying Qualcomm stock. “March was a pretty awful quarter for handset sales.”

Qualcomm’s stock, up 4.2% this year, rose less than 1% to $52.09 at the close of regular trading in New York. They dropped about 1% in extended trading after the report.

Excluding some costs, profit in the second quarter, which ended in March, fell to $1.04 a share, San Diego-based Qualcomm said. Sales declined 19% to $5.55 billion. Analysts had projected profit of 96 cents on sales of $5.33 billion.

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