As per iSuppli, even as the wireless chip market tanked in 2008, chipmakers Qualcomm (NASDAQ:QCOM) and ST-Ericsson turned in strong performances and gained market share. Broadcom (NASDAQ:BRCM) also increased its share marginally while Texas Instruments lost market share. Let’s take a look at their recent performances.
On July 22, Qualcomm, the leading wireless semiconductor company with annual revenue of $11.14 billion, reported its third quarter results. Q3 revenue was $2.74 billion, down 3% y-o-y but up 12% q-o-q. Net income was $737 million or $0.44 per share compared to net income of $748 million or $0.45 per share last year and net loss of $289 million or $0.18 per share last quarter as a result of the $748 million litigation settlement charges paid to Broadcom. Adjusted EPS was $0.54 per share versus analyst estimates of $0.51 on revenue of $2.73 billion.
Total cash at the end of the quarter was $15.7 billion, compared to $14.0 billion at the end of the second quarter and $11.2 billion a year ago. The company paid $282 million in dividends in the quarter.
By segment, Qualcomm Technology Licensing (QTL) revenue was flat over the year and down 15% q-o-q to $0.8 billion. In Qualcomm Wireless & Internet (QWI), revenue was down to 22% y-o-y and up 16% q-o-q to $148 million. Qualcomm CDMA Technologies (QCT) revenue grew 1% y-o-y and 36% q-o-q to $1.8 billion. QCT shipments increased 9% to 94 million, and CDMA-based device shipments increased 4% y-o-y.
Qualcomm has a substantial portion of the 3G IP and gets royalties for every CDMA phone sold around the world. Due to its strong position in the 3G market, it stands to get royalties from 3G iPhones without having a single component in the phone. Its chipsets are also found in handsets from Nokia, Samsung, Motorola, and HTC. Qualcomm is a founding member of Google’s Android coalition and provides chips for several Android phones. Qualcomm also entered into a partnership with the leading CDMA carrier Verizon to offer “machine-to-machine” wireless services in applications such as healthcare, manufacturing, consumer electronics and utilities.
The 3G iPhone has fueled the worldwide demand for 3G and despite the global economic uncertainty, Qualcomm expects strong demand for its chipset in fiscal Q4. It expects Q4 revenue in the range of $2.55 to $2.75 billion on shipments of 88 to 92 million MSM chipsets. Analysts forecast revenue of $2.72 billion.
Qualcomm also raised its fiscal 2009 revenue guidance to a range of $10.25 billion to $10.45 billion, about $200 million to $400 million more than its earlier guidance.
A day after its earnings were announced, the company was fined 260 billion won ($208 million) by the Korea Fair Trade Commission for deterring competition through discriminatory charges. South Korea accounted for about 35% of Qualcomm’s revenue in 2008. Qualcomm is also under investigation by the European Union’s antitrust regulator. It recently reached out of court settlements with Nokia and Broadcom. The fines are bound to affect its profit but not sales.
Qualcomm is currently trading around $46 with market cap of about $77 billion.
On July 23, Broadcom, a leading chipmaker with annual revenue of $4.6 billion, reported in its second quarter results that profits fell 90% due to the slump in demand for chips in the quarter. Q2 revenue decreased 13.4% y-o-y and increased 22% q-o-q to $1.04 billion, including $67 million from the Qualcomm agreement. Net income was $13.4 million, or $0.03 per share compared to net income of $134.8 million, or $0.25 per share last year and net loss of $91.9 million, or $0.19 per share last quarter.
Gross margin fell to 46.3% from 52.3%. Total cash and marketable securities were $2.3 billion. Broadcom repurchased 2 million shares for about $50 million.
The Mobile and Wireless target market grew 34% q-o-q. Broadcom’s key customers in wireless phones include Nokia and Samsung Electronics. The Broadband Communications target market revenue grew 15% q-o-q as customers aligned their inventory levels with end demand. The Enterprise Networking target market revenue declined 4% led by its switching business. Broadcom believes that it has seen the bottom in switching demand.
Broadcom had made four unsuccessful attempts to acquire Emulex in a bid to enter the converged enterprise networking market. Its highest offer was $912 million. Broadcom will now have to get into this market organically.
For the third quarter, the company expects revenue to increase 7% to 14% over Q2, including licensing revenue of $55 million. The stock is currently trading around $28 with market cap of about $14 billion. It hit a 52-week high of $29.23 on July 23.
STMicroelectronics (NYSE:STM), one of Europe’s largest chip makers with annual revenue of $10 billion, has also been hurt by the slump in demand for chips. However, it had a stronger-than-expected performance across most of its market segments and in China and Asia-Pacific.
Q2 revenue was $1.99 billion, down 17% y-o-y but up 20% q-o-q. The company reported its sixth straight quarterly loss of $318 million, or $-0.36 per share, up from $47 million last year but down from $541 million last quarter. Analysts expected losses of $0.38 per share on revenue of $1.89 billion. Q1 analysis is available here.
The company has cut about 4,500 jobs and reduced its inventories by almost $400 million in just six months, leading to very low gross margins of 26.1%, down from 36.8%. The weak dollar also hurt its margins as the company generates most of its revenue in dollars.
Total cash and cash equivalents was $2.9 billion at the end of the quarter. Total debt was $2.66 billion. ST’s net financial position was net cash of $205 million compared to a net debt position of $545 million at the end of 2008.
STM reported y-o-y declines in revenue across all market segments except the Telecom segment, which grew 17% driven by the complete integration of the Ericsson Mobile Platforms business into ST-Ericsson. Revenue from the wireless segment increased 25% q-o-q to $650 million. Revenue from Computer was down by 13%, Consumer 33%, Industrial 37%, and Automotive 38%.
ST-Ericsson’s key customers include Sony Ericsson, Nokia, LG, and Samsung Electronics. Though Nokia provides the company with a sizable chunk of the market, ST-Ericsson is seeking to gain North American exposure though Apple and RIM; they are highly sought-after clients because of their gross margins of about 40%.
For the third quarter, STM expects revenue between $2.07 billion and $2.27 billion. Gross margin is expected to increase to 31%. Analysts expect revenue of $2.01 billion.
The company is on target to lower costs by $750 million in 2009 and expects a majority of the savings to be realized in the second half of 2009. The stock is currently trading around $8 with market cap of about $7 billion. It hit a 52-week low of $3.73 on March 6.