Slower-than-expected LTE launch in China hit Qualcomm’s fiscal...

Slower-than-expected LTE launch in China hit Qualcomm’s fiscal Q2 earnings, with many customers there opting for less expensive TD-SCDMA handsets over more advanced models, analysts said. Qualcomm Technology Licensing (QTL) unit sales were the most affected by the “delayed ramp” in China for LTE handsets, with licensing revenue of $2 billion falling short of analyst estimates for $2.2 billion, FBR & Co. analyst Christopher Rolland said in a research note. QTL-related device sales were $66.5 billion, below Rolland’s estimate for $69 billion due largely to Chinese customers buying TD-SCDMA phones on which Qualcomm doesn’t get a royalty. Qualcomm CDMA Technologies (QCT) business had mobile data modem (MDM) shipments of 188 million units, up from 173 million a year ago, but short of analyst forecasts for 192 million. Despite the sales shortfall, Qualcomm remains confident of strong LTE sales this year “albeit somewhat more backend loaded than our previous expectations,” Qualcomm CEO Steve Mollenkopf said. Qualcomm has more than 100 4G licensees, including 60 in China, he said. About 270 cellular operators have deployed LTE, with another 210 planning them, Mollenkopf said. In the second half, more than half of Qualcomm’s MDM shipments will be LTE-enabled, he said. China Mobile is forecasting having 500,000 LTE base stations in place by year-end, Mollenkopf said. Meanwhile, Mollenkopf, in an interview Thursday on CNBC, said Qualcomm is “pretty confident we haven’t done anything wrong” despite allegations of bribery in China. Qualcomm received a Wells notice from the SEC in March that recommended enforcement action related to the bribery allegations, Qualcomm said in an SEC filing. Qualcomm, which responded to the notice on April 4, is mid-way through the process, Mollenkopf said. The company first became aware of the investigation in 2012 and started its own inquiry, Qualcomm said. Qualcomm found that it provided employment, gifts and other benefits to “individuals” from Chinese-state owned companies and agencies, the company said. The total gift was less than $250,000, Qualcomm said. Qualcomm is cooperating with the SEC and U.S. Department of Justice, the company said. Meanwhile, the carrying value of Qualcomm’s Qualcomm MEMS Technology (QMT) division’s goodwill and property tied to a manufacturing facility in Taiwan was $133 million March 30, while the factory and equipment was $240 million, the company said. About $44 million in property, plant and equipment was being held for sale, Qualcomm said. Qualcomm took a $444 million impairment charge is fiscal Q1 related to the manufacturing complex, the company said. The factory was to produce iMOD bistable displays that used pixel elements composed of 10-100 micron micro electromechanical systems (MEMS). Qualcomm at one point projected spending $1 billion on the factory, which was scheduled to start production in fall 2012. Qualcomm shifted the focus of its MEMS display business to licensing in 2012. Qualcomm’s fiscal Q2 net income improved to $1.95 billion from $1.86 billion as revenue rose to $6.36 billion from $6.12 billion. The company’s QCT sales earnings before taxes (EBT) grew to $740 million from $681 million a year ago as revenue rose to $4.24 billion from $3.91 billion. QTL EBT grew to $1.83 billion from $1.8 billion as revenue improved to $2.07 billion from $2.05 billion.