Qualcomm Facing Tough Competition and Delay in China but Still Optimistic
San Diego, California based Qualcomm Inc, forecasted first-quarter profits that did not meet the expectation of the analysts. The chip making company is struggling to keep up with strong competition from rivals in China and Taiwan. The company is also struggling with delays in closing licensing agreements in China.
In a conference call, the CEO of Qualcomm, Steve Mollenkopf said that agreement with two Chinese customers is taking a longer time than expected. Derek Aberle, the company's president said that some of the customers from China were "improperly withholding" royalties on patents of Qualcomm by altering the way in which they report sales.
On Wednesday, shares of the company dropped almost six percent during the extended trading hours.
In 2014, Qualcomm earned about half of its revenue from its Chinese customers and it said that it expected the matter to be resolved when the new agreements came into place. In the current year, Qualcomm has completed many deals which also include purchase of CSR, the British chipmaker and Ikanos which is a networking chip company.
Consolidations in the competitive market are not new for the chip making industry. Several chip companies which came under margin pressures entered deals like Intel acquired Altera in a $16.7 billion deal and Avago took over Broadcom in a $37 billion deal.
Qualcomm is reviewing a spinoff following pressure from Jana Partners to split its chip making unit from its patent-licensing business, which earns higher profits.
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