Qualcomm Inc on Wednesday posted quarterly revenue that missed expectations as it wrestles with a smartphone market that is losing steam and shifting to China, sending its shares lower.
The chipmaker reported fiscal second-quarter revenue of $6.37 billion, up 4 percent from the year-ago period. Analysts on average had expected $6.479 billion, according to Thomson Reuters I/B/E/S.
Qualcomm's revenue in the quarter is the smallest year-over-year percentage increase since the June quarter of 2010 when revenue shrank by 2 percent.
Less growth than expected in recent months in China, where China Mobile is preparing to launch a new, faster network with 4G, or LTE, technology, hurt Qualcomm's results in the quarter, Chief Executive Steve Mollenkopf told Reuters.
"We think that what's happening there is that is in anticipation of the launch of LTE," Mollenkopf said.
With growth in the smartphone industry moving away from wealthy markets such as the United States and toward China and other developing countries, where consumers favor less expensive devices, Qualcomm's revenue growth is slowing and it is focusing on costs to preserve its profitability.
China and other developing countries are a major opportunity for the San Diego company as consumers upgrade from feature phones to smartphones and as China Mobile, the world's largest cellphone carrier, rolls out its 4G network with technology that Qualcomm dominates.
But China also presents challenges for Qualcomm as its competes with local rivals like MediaTek to sell chips used in smartphones made by Chinese manufacturers like Huawei and Xiaomi, which sell for much less than phones popular in the United States.
Qualcomm had second-quarter net income of $1.96 billion, up 5 percent. GAAP diluted earnings per share were $1.14. Its non-GAAP earnings per share were $1.31, above its previous forecast of between $1.15 and $1.25. Analysts on average expected $1.22.
Qualcomm said it now expects full-year non-GAAP earnings per share between $5.05 and $5.25. It had previously forecast 2014 EPS between $5.00 and $5.20.
It said revenue in the fiscal third quarter, which ends in June, would be between $6.2 billion and $6.8 billion. Analysts on average expected third-quarter revenue of $6.592 billion.
Qualcomm shares were down 3.36 percent in extended trading after closing up 0.12 percent at $80.71 on Nasdaq.