Though the world’s largest mobile chip maker wasn’t fazed much by the recession that has driven down other telecom vendors’ profits last year, the bad economic times may catch up to Qualcomm (NASDAQ:QCOM) this year. Qualcomm, which is often looked at as an early indicator of the overall health of the wireless market, didn’t forecast recovery in its fiscal Q1 earnings report today as many had hoped. Rather it downgraded its sales forecast for 2010 to between $10.4 billion and $11 billion, while its previous estimates were as high as $11.3 billion.
Qualcomm CEO Paul Jacobs said that the muted recovery in developed markets has lowered demand for its higher-end chipsets. While Qualcomm is forecasting a 21% increase in device shipments in 2010, most of them will be lower-end devices, which use cheaper chips and produce lower royalties, two of Qualcomm’s primary revenue streams. Qualcomm, however, isn’t lowering its earnings guidance, and in the last quarter it managed to double its profits despite the hard hits the telecom equipment sector has been taking.
Qualcomm projects that it will ship 88 million to 92 million of its Mobile Station Modem integrated handset chipsets in fiscal Q2, a 28% to 33% increase over the 69 million it shipped the same quarter last year. But while the number of overall mobile devices will also increase, their climb won’t be as steep. Qualcomm predicted 144 million to 149 million device shipments to ship in the current quarter (actually shipped last quarter but recorded this qurter), up from 128 million during last year’s 2nd quarter. Furthermore the average price of all of those devices will likely drop significantly from $201 to $179 year-over-year. For the remainder of the year Qualcomm expects some improvement in those prices, but not much, rising to $181 per unit for the year, compared to $201 in 2009.