At the close of trading session on Thursday, Qualcomm Inc (NASDAQ:QCOM) was one of the exceptional tech stocks that showed a decline as most of the tech stocks like Microsoft, Zynga and Apple recorded a bullish session and ended up on a high note. Sharing the space with AOL, this communication giant lost 8.6% on its share value due to which its shares closed at $70.58 and this dismal performance was attributed to its third quarter results having fallen short of expectations.
Trouble for Qualcomm Inc (NASDAQ:QCOM) began when it made its foray into China with the intention of establishing itself as a dominant player akin to its position in USA. However, things took a turn for the worse in November, 2013, when the National Development and Reform Commission, a regulatory body in China, put its business practices under the scanner. Owing to the ongoing investigation, the company is unable to accrue as much revenue as had been previously calculated.
Qualcomm Inc (NASDAQ:QCOM) issued the following statement to explain its lack of income from the Chinese market –
“We also believe that certain licensees in China currently are not fully complying with their contractual obligations to report their sales of licensed products to us (which includes certain licensees underreporting a portion of their 3G/4G device sales and a dispute with a licensee) and that unlicensed companies may seek to delay execution of new licenses while the NDRC investigation is ongoing.”
Based on the reasons cited in the statement, the company declared less-than-satisfactory Q3 results and hence ended up amongst the few tech decliners.
CNBC held a discussion on the topic as to whether it would be worth making an entry into Qualcomm now that the stock is poised at a lower level. Contradictory views were presented by two FMHR traders wherein Jon Najarian felt that things would be smooth for the company once the problem in China reached its satisfactory conclusion. Mike Murphy, on the other hand, argued that the company had been great in the past but its future appears to be extremely shaky.
Moreover, he went on to point out that there was no certainty as to which way the decision would go in China, meaning if it did not go in favor of Qualcomm Inc (NASDAQ:QCOM) then the company was bound to be adversely affected.
This article has been written by Vinita Basu.