What’s in Store
While the projection points to a dismal performance, the bottom-line stands to benefit from the management’s effective cost-cutting initiatives. Though the market is quite bullish about Qualcomm’s adoption of 5G, it is unlikely to bear fruit in the near term. In order to regain the waning momentum, what the company currently needs is strong organic growth.
Apple Settlement
As per the April settlement, which marked the end of a long-drawn-out patent battle with Apple, the smartphone giant will pay Qualcomm about $4.5 billion. The payment will reflect in the unadjusted results for the third quarter. Meanwhile, there is negative sentiment surrounding the recent anti-trust ruling against the company, which also impacted the performance of the stock in recent weeks.
Related: QUALCOMM Q2 2019 Earnings Conference Call Transcript
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It is alleged that Qualcomm misused its dominant position in the microprocessor industry and engaged in business practices that violated the anti-competition rules. However, the market’s mood turned positive once again after the Department of Justice recently issued a statement favoring the company.
Looking Back
Qualcomm’s second-quarter sales dropped 5% year-over-year to $5 billion, hurt mainly by the softness in its QTL licensing segment. Consequently, adjusted earnings edged down to $0.77 per share from $0.78 per share in the second quarter of 2018.
Competition
Last week, Intel (INTC) reported a 2% increase in second-quarter earnings to $1.06 per share, despite a decline in revenues. A modest rise in the Data Center business was more than offset by a sharp decline in client computing.
Also see: What Tesla executives discussed during Q2 earnings call
Qualcomm shares witnessed severe fluctuations this year, marked by sharp gains prior to the last earnings report and the subsequent retreat. The stock has gained 31% since the beginning of 2019 and 15% in the past twelve months.