Qualcomm gives a rosy outlook as a sign of stronger phone demand

(Bloomberg) — Qualcomm Inc., the world's largest seller of smartphone processors, gave an upbeat sales forecast for the current period and pointed to bright spots in the mobile device industry. Shares rose in extended trading.

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Revenue for the quarter ending in December will be between $10.5 billion and $11.3 billion, the company said in a statement on Wednesday. Analysts on average estimated the value at $10.5 billion. Earnings, net of certain items, will be up to $3.05 per share, beating Wall Street forecasts.

Investors are looking for signs that the smartphone market is recovering, particularly in China. Qualcomm has an advantage in this country because its chips run in most popular smartphones, especially high-end models. Wednesday's outlook suggests a recovery in demand is underway. The company said sales of Android-based phones in China rose 40% in the fiscal year that ended Sept. 29.

Shares rose about 8% in late trading after closing at $172.99 in New York. The stock was up about 20% this year through the close.

Although Chief Executive Officer Cristiano Amon is pushing Qualcomm harder into other markets such as automotive and computing, the company still gets more than 60% of its sales from chips for mobile phones. This makes its financial performance an indicator for the smartphone industry.

In the fiscal fourth quarter, earnings, excluding certain items, were $2.69 per share. Sales rose 19% to $10.2 billion. Analysts estimated earnings of $2.56 per share and revenue of $9.91 billion.

Phone revenue rose 12% to $6.1 billion in the period, just above analysts' average forecast of $6 billion. Sales of chips used in vehicles rose 68% to $899 million. Analysts forecast $816 million. Chips for connected devices brought in $1.68 billion, beating the average estimate of $1.55 billion.

One of Qualcomm's biggest customers, Apple Inc., uses the company's modem chips in the iPhone but is working to replace that component with an in-house version. Qualcomm, which has held on to the deal with Apple longer than many predicted, has repeatedly warned investors that this revenue stream will decline to zero over time.

Another key driver of Qualcomm's profits is its licensing of the fundamental technology that underlies all modern mobile networks. Phone makers pay these fees to Qualcomm whether they use its chips or not.

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