Qualcomm shares surge after it announces new licensing deal with Huawei

Qualcomm shares surge after it announces new licensing deal with Huawei”

The news sent Qualcomm's shares up during after-hours trading as much as 12% as of 7:11 PM.

"In China, just midway through the calendar year and despite the impact of COVID-19, 5G now represents the majority of domestic mobile phone shipments", he said. (QCOM) on Wednesday reported fiscal third-quarter net income of $845 million. Analysts, on average, estimated $5.77 billion, according to data compiled by Bloomberg. Earnings should range from $1.05 to $1.25 per share.

After resolving a bruising legal battle with iPhone maker Apple Inc (O:) previous year, Qualcomm entered 2020 with a deal to resume selling chips to Apple and predicting revenue growth from 5G devices, which fetch higher chip revenue per phone for the company.

By the numbers, Qualcomm raked in almost $4.9 billion in revenue during last quarter, for a profit of $982 million, both almost identical to the amounts it earned in the same quarter a year ago.

Huawei, which is still subject to U.S. government restrictions, trumped Samsung for the first time in the worldwide smartphone market in the second quarter, research Canalys said on Thursday.

Excluding the $1.8 billion gain from Huawei, Qualcomm predicts sales of $5.5 billion to $6.2 billion for the September quarter. Six analysts surveyed by Zacks expected $4.81 billion. On an adjusted basis, profit rose to 86 cents a share from 80 cents a share a year earlier. Apple makes its own core processor but uses Qualcomm's modem chip. The company's market cap is now around $115.77 billion.

More news: COVID-19 app, backed by federal government, now available

The big picture: The company posted earnings for the three months ending June 30 that were above expectations and said it expects that phone sales this quarter could be down 15% year over year, "including a partial impact from the delay of a global 5G flagship phone launch".

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

Qualcomm remains the top supplier of silicon for smartphones, including 5G phones.

The reach of its intellectual property and the profits they generate has attracted legal and regulatory challenges around the world.

"The most important element of the Qualcomm call was the settlement of the license dispute with Huawei, which we believe adds $900 million to $1 billion annual (licensing) revenue and about 70 cents in annual earnings", said Chris Caso, an analyst with Raymond James, in a research note.

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