Qualcomm Earnings Call Insights: Chip Sets and ASP Outlook

On Wednesday, Qualcomm, Inc. (NASDAQ:QCOM) reported its fourth quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Chip Sets

Tim Long – BMO Capital Markets: Just a two-parter on the chipset ASPs if I could. It sounds like a lot of LTE and good smartphone shipments in the quarter and expecting the same next quarter. Two things; one, could you talk a little bit about what’s going on with ASP at the lower end, obviously MediaTek is starting to do a little bit better, are you seeing more price pressure there? Secondly, I’m calculating a little bit better gross margin profile for the chipset business in the quarter, is that accurate? Have you seen – starting to see gross margin benefits from the move to 28 nanometer or from the higher ASPs?

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William E. Keitel – EVP and CFO: Tim, I’ll take the second part of your question on the gross margins. Let me just say for our first fiscal quarter of 2013, we do expect a nice increase in QCT’s operating margin. I won’t comment on the gross margin and I won’t give specifics on the Q1 operating margin for QCT, but I think we’ll share a little more color next week at the analyst meet, but again we do expect a nice pick up in QCT’s operating margin in fiscal Q1.

Tim Long – BMO Capital Markets: Then maybe the impact at low-end?

Steve Mollenkopf – President and COO: Tim. This is Steve. On the low-end, it’s pretty much playing out the way that we’ve discussed it or described it over the last year or so, which is, it’s pretty competitive market at the low-end. It’s very crowded a bit competitively and people are really pricing aggressively in order to get share or to maintain share, so we expect that to continue to some degree as we talked about for some time. One thing I should mention to, earlier I misspoke a bit, I said that the MSM8960 was our fastest product to 100 million units, actually it should have been 10 million units. So, I apologize for that. It’s 10 million units.

Flat ASPs

T. Michael Walkley – Canaccord Genuity: Bill, on QTL or the (indiscernible) device market ASPs are flat to even improving next year, especially with your GDP comments about lower mix maybe from mature markets. Can you just walk us through some of the factors that are keeping ASPs flat to up next year and when you might think longer term with more growth from emerging markets that might put a downward pressure on QTL ASPs longer term?

Derek Aberle – EVP and Group President: This is Derek. Let me go ahead and take that one. I think as we’ve said in the past, over the longer term we should see some amount of erosion in the ASP. I think as you look ahead to next year and we will provide some more color on this next week, I think there’s going to be somewhat offsetting trends. I think we are expecting to see more volume come from the emerging regions, but then sort of offsetting that to some extent we’re seeing more – higher percentage of devices at the highest tier in some of the developed regions and also we expect, as we’ve in the past, ASPs in some of the emerging regions that have been quite low to continue to increase with more smartphone penetration cannibalizing the future phone. So, I think all that kind of nets out together to relatively flat picture going forward next year.

T. Michael Walkley – Canaccord Genuity: Derek, the follow-on question is, connected tablets becoming a bigger impact in terms of ASP trends that you report?

Derek Aberle – EVP and Group President: I am sorry. Could you repeat that?

T. Michael Walkley – Canaccord Genuity: Sorry. Just wondering if connected tablets works more with LTE shipping and 3G are the connected tablets becoming more meaningful to your ASP calculations?

Derek Aberle – EVP and Group President: I think we’ve been – as the volume goes up and down quarterly, the volumes themselves have changed, but I think the percentage of total units that are coming from tablets have been relatively constant. I think you we’ll kind of have to wait and see how things play out going forward with Windows RT and some of the other Android tablets coming into the market over the next year.

A Closer Look: Qualcomm Earnings Cheat Sheet>>