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UPDATE 4-Qualcomm says China virus threatens phone industry disruption

Wed 5th February, 2020 10:34pm
(Adds details)
    By Stephen Nellis and Munsif Vengattil
    Feb 5 (Reuters) - Chip maker Qualcomm Inc  QCOM.O  said on
Wednesday that the coronavirus outbreak in China poses a
potential threat to the mobile phone industry, with a possible
impact on manufacturing and sales.
    The comments by Qualcomm, the world's biggest supplier of
"modem" chips that connect mobile phones and other devices to
wireless data networks, dragged down chip stock shares despite
signs that an industry downturn was ending.
    Qualcomm's chief financial officer, Akash Palkhiwala, on a
conference call with investors following the release of
quarterly results, said the company expects "significant
uncertainty around the impact from the coronavirus on handset
demand and supply chain." 
    Qualcomm shares fell as much as 3.75% in after-hours trade.
    The San Diego-based chip supplier forecast revenue for its
fiscal second quarter largely above Wall Street estimates, in
the latest sign that the protracted slowdown in the global chip
industry is easing.
    The forecast was wider than usual because of the outbreak in
China, which has killed hundreds and sparked fears around the
world. The company lowered the bottom end of its
earnings-per-share guidance by 5 cents to account for possible
disruptions, Palkhiwala said.
    On the conference call, Qualcomm officials tried to calm
analyst concerns over the virus, saying that the biggest 5G
markets this year are expected to be in the United States, Korea
and Japan, and that the company could weather disruptions.
    "If we have an issue, a supply chain issue or demand issue
in China, we tend to have the ability to have other regions to
back it up," Chief Executive Steve Mollenkopf said. "So we tend
to look at the business in terms of our planning. We want to
make sure that we maintain that strength across different
    But investors' virus worries overshadowed results that
otherwise beat expectations.
    While it is dominant in mobile modems and processors,
Qualcomm has been pushing to win over customers with the kind of
chip called a radio-frequency front end that is more complex in
phones that use 5G. Even though it forecast fewer modem sales
than Wall Street expected, it generated more revenue per modem
shipped than in the past.
    In an interview, Mollenkopf said the company's forecast
reflected strong demand for radiofrequency chips from phone
makers, especially in China, where brands are putting 5G
capabilities into cheaper devices that will sell in greater
quantities sooner than Qualcomm had originally anticipated.
    "It's really the first time that you're seeing that
significantly in our numbers," Mollenkopf said.
    Qualcomm left its estimate of the number of 5G mobile
handsets that will be sold in 2020 unchanged at between 175
million and 225 million.
    Qualcomm forecast total revenue in the range of between $4.9
billion and $5.7 billion for its second quarter, the mid-point
of which is largely above analysts' average estimate of $5.08
billion, according to IBES data from Refinitiv.
    It forecast revenue for its chip segment of $3.9 billion to
$4.5 billion, versus estimates of $3.8 billion, according to
Refinitiv data.
    Qualcomm, which generates most of its profits by licensing
its technology to mobile phone makers and others, said the
segment reported revenue of $1.4 billion in the fiscal first
quarter ended Dec. 29, in line with estimates of $1.41 billion,
according to FactSet. On the conference call, Qualcomm said it
has signed 85 license agreements for 5G technology, up from 75
in November.
    Excluding items, the company earned 99 cents per share in
the first quarter, topping analysts' average estimate of 85
cents. Revenue rose 5% to $5.08 billion, beating analysts'
estimates of $4.83 billion.

 (Reporting by Stephen Nellis in San Francisco and Munsif
Vengattil in Bengaluru; Editing by Peter Henderson and Leslie
 ((; Twitter: @MunsifV; +91
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