Apple Royalty Dispute Dings Qualcomm's Guidance

Reuters

Six analysts surveyed by Zacks expected $5.88 billion.

It is not clear whether Apple's contract manufacturers will underpay royalties owed under their contracts with us in the third quarter of fiscal 2017, which could have a negative impact on our financial results. Segment operating income rose 179% to $475 million. Qualcomm's accounts receivables soared in the quarter, to a deficit of $1.8 billion, up from $392 million in the year-ago period. StubHub drove $916 million in gross merchandise volume, representing a 6% year over year increase, and $210 million in revenue, up 18% year over year as reported. eBay added 2 million active buyers across its online platforms, bringing the total number of buyers to 169 million globally.

The quarter included a $974 million reduction to revenue, or 48 cents per share, related to the BlackBerry arbitration decision, Qualcomm said on Wednesday. Analysts surveyed by Zacks had forecast adjusted earnings per share of $1.09.

It expects MSM chip shipments of 180M-200M (a 10% decrease to flat) and total reported device sales of $59B-$67B. It said it expected Apple's contract manufacturers to underpay royalties during the quarter commensurate with the amount that is now in dispute, but also widened its range of guidance for the third quarter to reflect uncertainty over iPhone-related royalties.

Revenue fell 9.6 pct to $5.02 billion in the second quarter ended March 26. Our guidance range for fiscal third quarter EPS is wider than our typical practice primarily due to this uncertainty.

The litigation has weighed on Qualcomm's shares, which are down about 19 percent this year through Wednesday's close.

"With our leading technology roadmap and pending acquisition of NXP, we are positioned to address a larger set of opportunities ahead than any other time in our history", he said, referencing the purchase of a semiconductor firm based in The Netherlands.

Shares of Qualcomm ticked higher in extended trading, climbing by as much as 1.69% to $53.50 following tonight's report.

Both the chip and licensing businesses performed well during the second quarter, but Qualcomm was forced to provide broad guidance ranges because of its concern that Apple contract manufacturers will continue to underpay royalties. Qualcomm agreed to purchase NXP Semiconductors NV, a leader in chips for the automotive industry, for $39 billion in late 2016.

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