Qualcomm FY 4Q15 Earnings Call Notes

posted in: Notes | 0

QUALCOMM (QCOM) Steven M. Mollenkopf on Q4 2015 Results

Device shipments should grow 10% in 2016

“We estimate that global 3G/4G device shipments will grow approximately 14% in calendar 2015 and 10% in calendar 2016 at the midpoint, driven primarily by the migration to 3G/4G devices in emerging regions and cellular connectivity growth in adjacent segments outside of handsets.”

Decline in ASPs due to heavier discounting in premium devices and share gains by Chinese OEMs

“We expect global 3G/4G device ASPs to decline at a more moderate rate in fiscal 2016 versus fiscal 2015, although still at a higher rate than we expect over the longer term. This outlook reflects a number of factors including heavier than normal discounting of high premium tier devices in the near term and continued share gains by Chinese OEMs that are currently selling at lower prices than other licensees. Over the longer term, we expect ASP declines to moderate for a variety of reasons including OEM consolidation in China and increasing device ASPs by Chinese OEMs, as well as users in emerging regions replacing devices at higher price points.”

Chinese OEMs are making it difficult to collect royalties

“the negotiations with a handful of these licensees are taking longer than we previously expected. In some of these cases, although the licensees acknowledged they need to pay royalties to QUALCOMM, we believe in connection with the negotiations they have stopped reporting certain of their sales and royalties or did not report their sales and royalties in a manner that allows us to record revenue.”

We think we’re well positioned for 5G because it uses 4G as an anchor

“On 5G, a couple things on 5G. First, when we look at 5G, we look at that as an area where it will be a continuation of – we think the strength that we’ve had in 4G will also transition over to 5G. One of the reasons is that the anchor bands or the anchor, 5G actually uses a 4G anchor. I think there’s pretty well – a pretty good alignment at the physical layer on how we put things together. We are obviously contributing a lot on 5G. 5G compared to maybe 3G and 4G, there are probably fewer companies really carrying the load there. We’re certainly one of them.”

Will start to get more of a replacement market going in emerging regions

“as we see more of the growth in the future coming from the emerging regions, we’re going to get to a place, probably starting next year, where there’s more of a replacement market in the emerging regions as opposed to the first migration from 2G to 3G/4G. And that will have a moderating effect on ASP declines over time.”

We feel very strong in lower tier. It’s “comfortable” at the higher tier

“I think the competitive dynamic, it’s still a very competitive market, particularly at the low tier. We consider ourselves to be in a very strong position there. I feel good about our competitive position. At the higher tiers and particularly in the areas where people want to have international launches, I think our position, it feels quite comfortable. That being said, there are a lot of people going after this market. It’s an attractive market, but I think it’s getting harder and harder for people to have the breadth of technology to deliver on all of these products.”

We tend to be multiple generations ahead of competitors in modem

“on the modem side, it’s obviously a strength of QUALCOMM’s. We tend to be several if not multiple generations ahead of our competitors, primarily on feature set, but also on maturity, geographical breadth. And those are important things when you’re talking about dealing particularly with worldwide OEMs, and it’s an area that we obviously defend very rigorously. ”

It will be increasingly important to have products on both licensed and unlicensed bands

” The other aspect that’s happening and will play out over the next couple of years is that the importance of having RF, the access to multiple bands, the ability to deliver products not only in the licensed bands but in the unlicensed bands will continue to become, actually will increasingly become more important, and those things will be table stakes by the time you get to 5G. Now we’re driving to have those things happen as quickly as we can.’