Slower demand for 4G handsets creates "headwinds" for Qualcomm

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Qualcomm expects 5G ramp-up in early 2020.

Qualcomm reported slower demand for 4G cell phones as the global market gets ready for 5G. But the company still posted $9.6 billion in revenues for the quarter that ended June 30, a 73% improvement over a year ago.

Net income was also $2.1 billion, up 79%. CEO Steve Mollenkopf said Wednesday that 5G design wins have doubled in the past three months “leaving us extremely well positioned as 5G ramps in early calendar year 2020.”

On a call with analysts, he said that Qualcomm had done “extremely well despite challenging marketing conditions.” 

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Qualcomm’s stock fell to $69.65 in after hours trading on Wednesday, down 4.8%.

The U.S. ban on exports to Huawei in China caused Huawei to pivot its focus towards 5G and the China market instead of 4G and other countries, which “contributed to industry conditions to create headwinds in the next two quarters,” Mollenkopf said.

Qualcomm estimated total 3G/4G/5G device shipments with its components are down by 3% in mid-2019, a reduction of about 100 million devices to a range of 1.7 billion to 1.8 billion. By contrast, three operators in China are installing 100,000 5G base stations based on Qualcomm chips.

Mollenkopf noted that Qualcomm has a competitive advantage as the only chipset vendor to support both sub 6 GHz and millimeter wave 5G rollouts as well as technologies ranging from the 5G handset modem to 5G antennas.

On the legal front, Qualcomm General Counsel Donald Rosenberg said the U.S. Departments of Justice, Energy and Defense have supported Qualcomm’s motion to stay an antitrust judgment related to the chipmaker’s patent licensing practices.

RELATED: Qualcomm asks U.S. appeals court to put antitrust judgment on hold

U.S. District Court Judge Lucy Koh ruled in May, siding with the Federal Trade Commission, that Qualcomm had violated competition laws by charging excessive licensing fees and unreasonably high royalties for its patents. Qualcomm asked a U.S. Appeals court for the stay of Koh’s ruling on July 8.

“It’s a fairly widespread consensus that Judge Koh’s order is erroneous in many respects,” Rosenberg said. “We think we’ll be successful on the merits. Our chances are very good.”

Meanwhile, all current agreements Qualcomm has with its customers are enforceable, the company said. A briefing on the matter is expected by the end of the year.

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