On Wednesday, Qualcomm (QCOM) posted solid fiscal fourth-quarter results that showed record revenues, earnings, and MSM (Mobile Station Modem) chipset shipments. We are maintaining our $53 fair value estimate.
The firm’s revenue performance was particularly impressive. Its top line jumped 39% on a year-over-year basis and 14% sequentially thanks to strong growth in CDMA-based (code division multiple access based) MSM shipments. Qualcomm continues to reap the benefits of sales of smartphones (like Apple’s iPhone and devices using Google’s Android software), which use its chips, and adoption of 3G technology, which depends on the firm’s patents for CDMA technology. Growth of 3G in emerging markets continues to be strong, and according to Wireless Intelligence, emerging-market 3G connections increased nearly 40% in the quarter. The company has over 200 royalty-bearing 3G licenses and 13 single-mode OFDM licenses around the world, an impressive product suite.
Qualcomm’s non-GAAP operating income increased 44% from the same period a year ago, while non-GAAP net income jumped 24% (diluted earnings per share advanced 18%). Qualcomm also noted that the integration process regarding its largest acquisition to date, Atheros, has gone very well, and the earnings trajectory reflects this. Free cash flow was very strong, coming in at 41% of revenues, up 52% from last year’s quarter. We expect the firm to continue to return cash to shareholders via a dividend and share buybacks.
Looking ahead, Qualcomm provided a rosy outlook for the first quarter of fiscal 2012. Management expects revenue to advance by as much as 42% on a year-over-year basis, while non-GAAP diluted earnings per share is anticipated to increase by 12% on the high end, to $0.92. Backing these growth numbers are expectations for as many as 154 million MSM shipments, a 31% increase.
For all of fiscal year 2012, the company, on the high end of its guidance ranges, expects revenue to jump 27% and non-GAAP earnings per share to increase 13%, above consensus estimates. Qualcomm seems very excited about the upcoming commercial launch of its Snapdragon multimode LTE solution, and the company continues to invest in Microsoft’s (MSFT) Window’s computing platform to go beyond cellular into mobile. In fact, the firm expects Windows 8 to be a significant driver beyond fiscal 2012, which speaks to the sustainability of its current growth trajectory. We continue to like the optimism the company exudes.