Qualcomm, Inc. (QCOM) Profit Hurting From Chinese, American, and European Regulatory Investigations

QUALCOMM, Inc. (QCOM)

Qualcomm, Inc. (NASDAQ:QCOM) expressed concerns that investigations into the company’s business practices is harming profitability. The company, a leader in smartphone chips, has seen a drop in its shares – as much as 6.5%, sliding from $77.20 to 72.50 on the NASDAQ.

The drop in the company’s market shares value followed disclosures that Qualcomm, Inc, (NASDAQ:QCOM) is facing antitrust investigations from China’s National Development and Reform Commission (NDRC), effectively blocking the chip maker’s ability to collect royalties for 11 months on end now, a situation of irony in the face of China’s growth in high speed 4G network that raised demands for cutting edge smartphones.

According to Reuters, Qualcomm, Inc (NASDAQ:QCOM) President Derek Aberle said that the company is cooperating with China’s NDRC over possible solutions to resolve issues, but he also added, “we don’t have an ability to update in terms of expectations and timing.”

QUALCOMM, Inc. (QCOM)

Compounding the company’s legal woes are two separate probes from the U.S. and the European Commission. The U.S. Federal Trade Commission is running after Qualcomm, Inc. (NASDAQ:QCOM) over its licensing and chip businesses while the European Commission is investigating the company’s baseband chip business rebates.

An analyst at Sanford C. Bernstein & Co., Stacy Rasgon, said “It’s not encouraging, I would have thought the U.S. government would have their back given what’s going on in China, but apparently not.”

As an owner of a standard used in majority of phone systems, Qualcomm, Inc. (NASDAQ:QCOM) is trying to expand its market reach in China, the world’s most populous country, at a time when its networks are upgrading to long-term evolution standard. This position, however, will largely depend on the decision of the NDRC regarding its current probe of the company.

Thomson Reuters I/B/E/S said that analysts expects Qualcomm, Inc. (NASDAQ:QCOM) to generate a revenue of $28.91 billion revenue for fiscal year 2015, but the company forecasts indicate a lower figure between $26.8 billion and $28.8 billion.

The company also forecasts a figure of between $5.05 and $5.35 for its fiscal year 2015 non-GAAP profits per share, in contrast with analysts’ average expectation of $5.58.

Revenue report for the fiscal fourth quarter ending Sept.28 reflected an amount of $6.69 billion, up by 3% on the same period for the previous year, as against analysts expectation of $7.016 billion. Fourth quarter net income is at $1.89 billion, up by 26% compared to the previous year, with GAAP and non-GAAP earnings pegged at $1.11 and $1.26 per share respectively.

This article has been written by Nonito Guntan.

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