Tag Archives: intc

Qualcomm Loses Apple Business To Intel, Confronts Smartphone Drop

While not mentioning Apple ( AAPL ) by name, Qualcomm ( QCOM ) implied it will lose business to Intel ( INTC ) as a chip supplier for the iPhone 7, Apple’s newest smartphone expected to launch this fall. The comments came during the company’s quarterly earnings conference call after the market close Wednesday, with Qualcomm’s EPS guidance falling short of Wall Street estimates. Qualcomm CEO Steve Mollenkopf told analysts it was important for planning purposes to factor in “a range of second-sourcing assumptions at our large customers.” He said improving demand for premium and high-tier devices in the second half of the fiscal year would be “offset by reduced demand for thin modem products and low-tier chipsets.” “Apple iPhone 7 modem share loss is confirmed,” wrote Pacific Crest Securities analyst Michael McConnell in a research note late Wednesday, a point of view shared by other analysts. The understanding is that Intel will be a second-source supplier to Apple for chips in the iPhone 7 that manage connections to wireless networks, called either modem or baseband chips. Qualcomm is expected to remain the primary supplier to Apple for these chips, but the win by Intel was seen as a setback to Qualcomm, the leading smartphone chip developer. McConnell says Qualcomm is likely to lose a 20% to 30% share of baseband chips in the new iPhone to Intel, worth annual revenue of about $600 million to $900 million, he wrote. He maintained an overweight rating on Qualcomm but lowered the price target to 61 from 63. Qualcomm stock was down about 1%, near 51.50, ahead of the closing bell in the stock market today . Qualcomm stock is down 25% in the past year. Smartphone Slowdown Weighs On Qualcomm The loss to Intel comes as Qualcomm is maneuvering through a slowdown in smartphone sales as the market nears saturation. Qualcomm lowered its guidance on smartphone device sales to about 1.67 billion in 2016 from previous guidance of 1.72 billion. It expects year-over-year growth of about 8%, down from 10%. IDC estimates smartphone shipments in 2015 rose 10% to 1.4 billion units, slowing from 27% growth in 2014. IDC expects smartphone growth in China to be flat in 2016. It was the maturing smartphone market and the potential for market share loss that that caused Rosenblatt Securities to downgrade Qualcomm to neutral from buy, though it maintained a price target of 57. RBC Capital analyst Amit Daryanani said there was a lot to digest in the Qualcomm earnings report, given the increased uncertainty. Risks to the stock price include lower smartphone pricing, lower royalty rates, increased competition from a variety of manufacturers and slower smartphone growth. Qualcomm is dealing with the market changes in multiple ways. It has focused on a $1.4 billion cost-reduction plan, boosting cash flow and profit, bolstering research and development, positioning for industry growth and making China licensing a top priority, among other steps. The company says that it’s on track to realize at least $700 million in savings in fiscal 2016, an increase of $100 million from its original estimate. Qualcomm reported revenue of $5.6 billion for the quarter ended March 27, down 19% from the year-earlier quarter but beating the consensus estimate of $5.34 billion. It was the fourth quarter in a row of decelerating revenue, year over year. Earnings per share minus items fell 26% to $1.04, but that number topped the 96-cent consensus estimate of analysts polled by Thomson Reuters. It was the fourth quarter in a row that EPS has decelerated. Qualcomm’s fiscal Q3 revenue guidance beat, but views on EPS missed.

Verizon Revenue Miss Puts Advertising Push, Regulation In Spotlight

Verizon Communications ( VZ ) early Thursday reported Q1 revenue that missed Wall Street views, putting its recent acquisition spree — and its strategy to pursue growth from mobile video and advertising — in the spotlight on its earnings call. Verizon stock was down nearly 4% in afternoon trading Thursday, after the phone company reported EPS in line with analyst consensus estimates but revenue that missed views. High-dividend-paying Verizon and AT&T ( T ) were among top-performing large-cap stocks in Q1, but both have fallen in April. Verizon provided no update on its interest in acquiring struggling Web company Yahoo ( YHOO ). Verizon said that AOL, which it acquired last June for $4.4 billion, had its best March quarter in five years; but Verizon did not break out the digital media company’s results. Nor did Verizon provide subscriber or other data for its ad-supported Go90 mobile video service, launched in late September. CFO Fran Shammo, on Verizon’s earnings conference call with analysts, defended Verizon’s acquisitions and investments in digital media firms that cater to young adults and teenagers. Verizon is turning to advertising as the next leg of wireless revenue growth, as growth from wireless data products slows amid fierce competition with AT&T, T-Mobile US ( TMUS ) and Sprint ( S ), says Craig Moffett, an analyst at MoffettNathanson. Shammo says that Verizon will provide more transparency later in 2016 on how its push into digital media is progressing. “On AOL performance, I think I’m not going to get into a lot of details on AOL, but they’ve had the best quarter in revenue in the last five years,” Shammo said. “We will, as I said before, open the box at some point in time to give you more visibility to this, and I continue to say that that will be midyear to maybe third quarter of this year where we’ll start to produce some numbers around some of these more specific platforms.” The CFO said that he expects more operating synergy between AOL and the Go90 service. Will Regulatory Moves Hurt Verizon’s Ad Ambitions? Along with AOL’s ad platform last year, Verizon acquired online brands such as Huffington Post, TechCrunch and Engadget. Verizon also snapped up ad firm Millennial Media for a reported $250 million. Verizon recently bought a 24.5% stake in DreamWorks Animation ’s ( DWA ) AwesomenessTV, a digital network for teenagers and young adults. Verizon also teamed with Hearst to acquire video website Complex Media, while Verizon-AOL acquired virtual reality studio RYOT for a reported $10 million to $15 million. Those deals followed Verizon’s 2014 acquisition of Intel ’s ( INTC ) Internet video business OnCue. In 2013, it also purchased EdgeCast Networks, a content delivery network. Amid the acquisition spree, some analysts worry about regulatory moves that could hinder Verizon’s ability to increase ad revenue. Verizon aims to use wireless customer location data to support its advertising business, analysts say. The Federal Communications Commission in March proposed a rule that would require mobile and fixed Internet service providers to get customer consent to collect data for targeted advertising. Under the privacy rules, ISPs would need to tell consumers what information they are collecting, how they are using it and when they will share it. “Privacy and security has always been a priority for Verizon,” said Shammo. “The issue that we have right now is that the FCC’s proposed rules would apply to broadband (service) providers but not to companies like ( Alphabet ’s ( GOOGL )) Google or Facebook ( FB ). “If we’re going to have rules, we need to make sure we don’t single out certain industries. That’s something our legal department continues to work with the FCC on.” Verizon’s buyout of Vodafone Group ’s ( VOD ) 45% stake in Verizon Wireless for $130 billion in 2014 gave it more flexibility to use cash for acquisitions and pursue a new strategic direction. Verizon had $104 billion in net debt as of March 31, down slightly from $109 billion in Q1 2015. On April 1, Verizon closed a deal to sell wireline assets in California, Florida and Texas to Frontier Communications ( FTR ) for $10.5 billion. The deal could lower Verizon’s debt, unless it acquires part or all of Yahoo. Verizon on Thursday reiterated guidance for flat full-year adjusted earnings. Verizon said that the strike of 39,000 wireline workers, which began April 13, could pressure current-quarter profit. Verizon said that its Q1 profit rose 4% to $1.06 from the year-earlier period, with revenue rising less than 1% to $32.17 billion. Analysts had modeled revenue of $32.46 billion. Excluding AOL, acquired in June 2015, Verizon said that its Q1 revenue fell 1.5%. Wireless revenue fell 1.4% to $22 billion. Wireless revenue from IoT (Internet of Things) products, mainly Web-connected cars, rose 25% to $195 million, Verizon said.

Mellanox Tanks On Q2 Guide; But ‘Well Ahead’ Of Intel, Broadcom

Mellanox Technologies ( MLNX ) stock dove Thursday on weaker-than-expected Q2 guidance late Wednesday, but analysts say the IBD Leaderboard stock won’t succumb to competition from “large incumbents” Intel ( INTC ) and Apple ( AAPL ) supplier Broadcom ( AVGO ). Summit Research analyst Srini Nandury calls Mellanox stock “the name to own in this space,” talking about the Ethernet and Infiniband markets. But Mellanox stock was down 14% in midday trading on the stock market today , at a two-month low below 48. For Q1, Mellanox reported 81 cents earnings per share ex items on $196.8 million in sales, up a respective 35% and 34%. Both metrics topped the consensus of 14 analysts polled by Thomson Reuters for 75 cents and $191.7 million. IBD take: Mellanox is a big mover today, and the move is down, but it had been doing well. The Q2 guide was Wall Street’s sticking point, Credit Suisse analyst John Pitzer wrote in a research report, though he retained an outperform rating and 60 price target on Mellanox stock. Current-quarter sales guidance for $180 million to $185 million, up 12% at the midpoint, missed Wall Street expectations for $214.6 million, Pitzer wrote. Q1 was Mellanox’s seventh consecutive beat and fourth straight of record quarterly revenue, Piper Jaffray analyst Andrew Nowinski and Summit Research analyst Srini Nandury wrote in separate reports. Nowinski maintained his overweight rating and 65 price target on Mellanox stock. Nandury rates Mellanox stock a buy and also has a 65 price target. Both note Intel’s Omnipath isn’t, so far, holding a candle to Mellanox’s 100-gigabyte/second Infiniband product. Omnipath is also 100GB, but Mellanox is on track to launch 200GB and 400GB products in 2017 and a 1-terabyte/second product early next decade. “Mellanox is seemingly ahead of everybody in the market and is executing flawlessly on the Infiniband road map,” Nandury wrote. He said Mellanox is the only OEM to deliver 25/50/100-Gb Ethernet adapters in addition to switches, “well ahead of Broadcom.” Intel stock was down a fraction and Broadcom stock down 1% midday Wednesday. No. 1 chipmaker Intel, late Tuesday, reported mixed Q1 results on a minimal year-over-year climb in PC sales and announced it would layoff 12,000 in an effort to focus on stronger segments.