Qualcomm Q2 Report: a 19% drop in revenues

25 April, 2016

Qulacomm’s revenues dropped to $5.6 Billion in the first quarter of 2016. Q2 forecast is also bleak. IDC expects smartphone growth to stall

Qulacomm’s revenues dropped to $5.6 Billion in the first quarter of 2016. Q2 forecast is also bleak. IDC expects smartphone growth to stall


The slowdown in smartphone growth  scratched Qualcomm. The San Diego company reported $5.6 million revenue in the Q1 2016, a 4% drop compared to Q 2015, and a 19% drop compared to Q1 2015. The operating profit amounted to $1.4 billion compared to $1.4 in the previous quarter.

Qualcomm’s revenues are based on the sale of mobile chips, mainly from its flagship System-on-Chip Snapdragon, as well as the licensing royalties for its technologies. Qulacomm has recently signed a licensing patent agreement with the Chinese Hisense Corporation, allowing the Chinese giant to develop, produce and sell Qualcomm’s technologies.

Lately it has signed of a settlement agreement with LG. Analysts estimate the agreement to generate $200 million in royalties due to LG’s licensed use of Qualcomm technology. “We are pleased with our continued progress in the licensing business, including the recent conclusion of new license agreements in China and the resolution of our dispute with LG Electronics,” said Chief Executive Steve Mollenkopf. “The demand for Snapdragon processors for the mobile market is growing”.

Chinese mobile market reaches maturity

The forecasts for the next quarter are bleak: Qualcomm expects its revenues to stagger, amounting to a disappointing $5.2-6.0 million in the second quarter of 2016. The company expects shipments to fall shipments to fall to 185-195 million units in the current quarter, compared to 225 million in Q2 2015.

Qualcomm’s report bring to light the slowdown in mobile market. According to research company IDC, the smartphone growth is expected to drop to a single digit in 2016, compared to a 10.4% growth in 2015. The slowdown is led by China’s Transition from a developing market, to a mature one.

The number of new clients worldwide is dwindling, and most of mobile purchases are upgrades to newer and better devices. The growth potential is shifting from China to developing markets like India and Indonesia, but the prices of new devices are constantly dropping.

Qualcomm’s flagship product is the Snapdragon Series. Snapdragons processors are embedded in smartphones of many leading vendors including Samsung, Lenovo, Xiaomi and Apple. Nevertheless, many analysts estimated that Apple might choose Intel Processors for its next product. Such a move by apple will dramatically affect Qualcomm’s revenues. Meanwhile Samsung is striving to expand the use of its home developed process applications, instead of Qualcomm’s processors.

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