Qualcomm jumps 15% after settling with Huawei and issuing strong earnings guidance

Qualcomm Shares Rise on Strong Forecast Huawei Agreement

Analyst Charles King of Pund-IT Inc. told SiliconANGLE that Qualcomm's deal with Huawei could also offer some potential relief to other companies too.

In an investor call, CEO Steven Mollenkopf said his firm inked a new multi-licensing agreement with Huawei.

For the September ending quarter, Qualcomm expects to make $5.5 billion to $6.3 billion with adjusted earnings per share of $1.05 to $1.25. While details of the deal are confidential, Huawei will pay Qualcomm $1.8 billion for back royalties owed for 2019 and the first six months of calendar 2020. Earnings should range from $1.05 to $1.25 per share.

The smartphone industry, which has suffered declining unit shipments since 2016, is pinning its hopes for a rebound on 5G, which will bring faster data speeds for consumers and add connections and services to now stand-alone electronics.

Reuters reported that the 5G smartphone vendor in question was believed to be Apple.

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Huawei, which is still subject to USA government restrictions, trumped Samsung for the first time in the worldwide smartphone market in the second quarter, research Canalys said on Thursday. Qualcomm's stock had gained 5.4% this year, trailing a general rally by semiconductor companies. "We are expecting the next inflection point in our 5G ramp to begin in our fiscal fourth quarter, with strong year-over-year growth in revenue and earnings per share". As CNBC noted, Qualcomm reported $4.89 billion in revenues versus expectations of $4.8 billion. Excluding certain items, profit was 86 cents, compared with Wall Street's average estimate of 70 cents.

Qualcomm provides the modems and processors that let handsets connect to networks and turn the data they receive into the smartphone features consumers have come to depend on.

Moorhead noted that the company signed 15 new 5G licenses for a total of 100, and added more than 285 Snapdragon 5G design wins for a total of 660. The company, however, has lost share in China as Huawei has focused on its home market and built devices with its own silicon.

"Our guidance for the [current] quarter ... includes an impact ... attributable to a planning assumption of an approximate 15 percent year-over-year reduction in handset shipments due to COVID-19, including a partial impact from the delay of a global 5G flagship phone launch", it reads.

Through the deal, Huawei can get complete technology patents on 5G SoC (system on a chip).

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