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Qualcomm Inc. (QCOM - Analyst Report) reported solid financial results for the second quarter of fiscal 2013 that meet the Zacks Consensus Estimate. Management has raised its outlook for fiscal 2013 primarily due to the gradual adoption of LTE networks in North America, rapid transition from 2G to 3G in China and India, and increasing licensing revenue.  

However, the revised guidance fell below the current Zacks Consensus Estimate. As a result, in the after market trade on NASDAQ, the stock price of Qualcomm was down by $3.80 (5.76%) to $66. The company is facing severe competitive threat from its closest rival Intel Corp. (INTC - Analyst Report), which has been redesigning its chipsets for the mobile computing market. Competition is also likely to emanate from formidable rivals like Broadcom Corp. (BRCM - Analyst Report) and NVIDIA Corp. (NVDA - Analyst Report). Qualcomm currently has a Zacks Rank #1 (Strong Buy).

Revenues

Quarterly total revenue of $6,124 million was up 23.9% year over year, surpassing the Zacks Consensus Estimate of $6,091 million. Segment wise, Qualcomm CDMA Technologies businesses contributed $3,916 million of revenues in the second quarter, up 28% over the prior-year quarter. Quarterly EBT margin was 17%. Qualcomm Technology Licensing generated $2,057 million in revenues, up 19% year over year. Quarterly EBT margin was 88%. Qualcomm Wireless & Internet segment generated $155 million, down 3% year over year and its operating profit was zero.

Net Income

On a GAAP basis, quarterly net income from continuing operations was $1,866 million or $1.06 per share compared with a net income of $1,438 million or 86 cents per share in the year-ago quarter. In the second quarter of fiscal 2013, adjusted (excluding special items) earnings per share came in at $1.05, exactly in line with the Zacks Consensus Estimate.

Chipset Statistics

During the second quarter of fiscal 2013, Qualcomm shipped approximately 173 million CDMA-based MSM chipsets, up 14% year over year. This figure was far better than the company’s guidance of a mid-point of 168 million. Average selling price of a mobile handset with an in-built Qualcomm chipset during this quarter was around $214 -$220.

Operating Metrics

Quarterly operating income was $1,877 million compared with an operating income of $1,514 million in the year-ago quarter. Gross margin was 61.3% compared with 63.9% in the year-ago quarter. Quarterly operating margin was 30.7% compared with 30.6% in the prior-year quarter. In the reported quarter, the company returned $431 million (25 cents per share) to its shareholders in the form of cash dividends.

Cash Flow

During the second quarter of fiscal 2013, Qualcomm generated $2,216 million of cash from operations compared with $1,888 million in the prior-year quarter. Free cash flow (cash flow from operations less capital expenditures) during the reported quarter was $1,927 million compared with $1,612 million in the year-ago quarter.

Liquidity

At the end of the second quarter of fiscal 2013, Qualcomm had $30,539 million of cash and marketable securities and no outstanding debt on its balance sheet compared with $26,837 million of cash and marketable securities and no outstanding debt at the end of fiscal 2012.

Third Quarter of Fiscal 2013 Financial Guidance

The third-quarter revenue will be within the range of $5.8 billion to $6.3 billion. Non-GAAP earnings per share will be within the range of 97 cents to $1.05. GAAP earnings per share will be within the range of 80 cents to 88 cents. Qualcomm is expected to ship 163 million to 173 million MSM chipsets during the third quarter of fiscal 2013.

Full Fiscal 2013 Financial Guidance

The fiscal 2013 revenue will be within the range of $24 billion to $25 billion. Non-GAAP earnings per share will be within the range of $4.40 to $4.56. GAAP earnings per share will be within the range of $3.78 to $3.93. ASP of mobile handset with an in-built Qualcomm chipset during fiscal 2013 will be around $216 to $224.

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