Qualcomm's great vanishing act: $2.48B of Q3 profit disappears
Smartphone CPU king talks of 'additional cost actions' as market recovery still out of reach
That long feted turnaround in the smartphone market isn't happening anytime soon judging by the latest financial results reported by handset CPU giant Qualcomm – profits plunged by almost 60 percent and more job cuts are looming.
For Qualcomm's third quarter of fiscal 2023 ended June 25, turnover from sales dropped 23 percent year-on-year to $8.451 billion, with the decrease caused by the phone and IoT divisions, and profit before tax dived to $1.757 billion.
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Smartphone shipments declined in 2022 by 12 percent to 1.19 billion and growth has eluded the sector in the first and second quarters of this year, although analysts at Canalys claim the market is showing some signs of stabilization.
Handset chips accounted for $5.255 billion of Qualcomm's quarterly revenue haul, down 25 percent, IoT was down 24 percent to $1.485 billion, and Automotive was up 13 percent to $434 million.
CEO Cristiano Amon said on a conference call to discuss the results: "We're taking a conservative view of the market, and we'll be proactively taking additional cost actions."
The company booked in restructuring charges of $285 million in the previous quarter, largely due to lay-off payments.
Total expenses in the quarter jumped to $6.628 billion from $6.464 billion a year ago.
The company estimates that phone CPU inventory – a cost – will be "down at least a high digit percentage" relative to last year "reflecting the macro environment," a "slower recovery in China," and bets on holiday season growth.
CFO Akash Palkhiwala said: "In IoT, channel inventory remains elevated due to weaker demand driven by the broader macroeconomic conditions. Since it remains difficult to predict the timing of a sustained recovery and customers remain cautious with purchases, we continue to operate under the assumption that inventory drawdown dynamics will be a factor through the end of the calendar year."
Estimates for Q4 are broad with revenues of between $8.1 billion and $8.9 billion, the mid-way point for which is below analyst forecasts. Qualcomm's share price subsequently dipped following the release of the results but are still up for the year.
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Palkhiwala said: "Our revenue growth will largely depend on macroeconomic environment, global handset units and China recovery.
"Until we see sustained signs of improving fundamentals, our operating framework does not assume an immediate recovery. Given our commitment to operating discipline, we will proactively implement additional cost actions in the first half of fiscal '24. This will be incremental to the reductions we have successfully completed in fiscal '23."
So it looks like the smartphone recovery will remain out of reach for some time yet, but the secondhand or refurbished markets seem to be doing relatively well. ®