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Thursday, 24 April 2014 10:58

Qualcomm suffers from shrinking smartphone market

Written by Nick Farrell

Lowest quarterly revenue increase

Qualcomm posted its smallest quarterly revenue increase since 2010 as it wrestles with a smartphone market that is running out of steam. The smartphone industry is moving away from wealthy markets such as the United States and toward China and other developing countries. The only problem there is that they want cheaper phones. As a result, Qualcomm's once-impressive revenue growth has slumped.

The chipmaker reported fiscal second-quarter revenue of $6.37 billion, up 4 percent from the year-ago period. The cocaine nose jobs of Wall Street had predicted revenue of about $6.479 billion. That was the smallest year-over-year percentage increase since the June quarter of 2010 when revenue shrank by 2 percent. It was far lower than the quarterly growth rates of over 20 percent that Qualcomm investors until recently have been accustomed to.

Chief Executive Steve Mollenkopf said there was less growth in China where China Mobile is preparing to launch a new, faster network with 4G, or LTE, technology. Basically people are waiting for the new tech and are saving their pennies. He said he expects improvements later in fiscal 2014 as China Mobile, the world's largest cellphone carrier, rolls out its new 4G network.

Qualcomm is also being investigated by China's anti-monopoly regulator, which says it suspects the U.S. company of overcharging and abusing its market position, allegations which could lead to fines of more than $1 billion. The majority of Qualcomm's revenue comes from selling so-called baseband chips that enable phones to communicate with carrier networks, most of its profit comes from licensing patents for CDMA technology.

Average prices for Mobiles in the December quarter, used to calculate licensing revenue for Qualcomm in the March quarter, were between $221 and $227, the company said. That was more than the $219 to $225 range that Qualcomm estimated for the September quarter in its previous earnings statement.

Nick Farrell

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