Qualcomm (NASDAQ:QCOM) shares took a beating in after-hours trading Wednesday, despite the wireless communications specialist topping expectations with its third quarter numbers.
Ahead of the start of open outcry trading on Thursday the shares were down 6.6% at US$56.27, as traders reacted to a gloomy outlook statement from the chip maker.
The company announced plans to slash overheads by US$1.4bn and to conduct a strategic review of operations, including the possibility of the patent-licensing business from the chip design arm, as pushed for by activist investor Jana Partners.
Adjusted earning per share (EPS) for the July-September quarter – the last of Qualcomm's fiscal year – were ahead of expectations at 79 cents; the market had penciled in a figure of 71 cents, though the EPS number drops to 67 cents once exceptional items are factored in. In the same quarter of 2014, diluted EPS had been US$1.11.
Revenue was also better than expected at US$5.5bn, versus analysts' estimates of US$5.21bn, albeit down 18% from US$6.7bn the year before.
Net income tumbled 44% to US$1.1bn from US$1.9bn the year before.
“Our fiscal fourth quarter revenues and EPS were at the high end of our expectations, with stronger-than-expected MSM chip-set shipments offsetting slower than expected progress concluding new license agreements in China,” said Steve Mollenkopf, chief executive of Qualcomm.
“We are encouraged by customer reaction to our flagship Snapdragon 820 [chip], are on track to deliver on our fiscal 2016 cost reduction targets and expect to exit fiscal 2016 on an improving financial trajectory,” he added.
The company said it expects revenue in the current quarter will be in the range of US$5.2bn to US$6bn, which means the consensus forecast of US$5.79bn is towards the top end of guidance.
EPS are tipped to be somewhere between 80 and 90 cents, which immediately had the analysts firing up their spreadsheets, as the median forecast of analysts covering the stock is currently around US$1.08.