Qualcomm forecast misses as customer loss hurts mobile chip sales

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(Reuters) – Qualcomm Inc forecast current-quarter revenue and below analysts’ expectations, saying the loss of a key customer is expected to hurt sales of its flagship Snapdragon chips for smartphones.

The company also cut its full-year revenue and profit forecast for the on Wednesday and said lower sales of Snapdragon chips were expected to pull down its overall mobile chips business in the second half of the year.

Qualcomm’s shares fell 2 percent in extended trading.

The company is facing intense competition in a crowded chips .

Most of Qualcomm’s revenue comes from selling chips that enable phones to communicate with carrier networks, but a majority of its profit comes from licensing patents for its CDMA cellphone technology.

Earlier this year, longtime customer Samsung Electronics Co opted to use an internally developed processor for its new Galaxy S6 smartphone rather Qualcomm’s latest Snapdragon mobile chip.

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Qualcomm had also warned that “challenges” with another of its chips had hurt its competitiveness in China, where growth has been slower than it had expected.

The company agreed in February to pay a fine of $975 million, the largest in China’s corporate history, ending a long-standing government investigation into its anti-competitive practices.

The deal also requires Qualcomm to lower its royalty rates on patents used in China, hurting its patent licensing revenue.

The company forecast an adjusted profit of 85 cents-$1 per share and revenue of $5.4 billion-$6.2 billion for the third quarter.

Analysts on average were expecting a profit of $1.14 per share and revenue of $6.50 billion, according to Thomson Reuters I/B/E/S.

Qualcomm cut its forecast for 2015 adjusted profit to $4.60-$5.00 per share from $4.85-$5.05 per share and for revenue to $25 billion-$27 billion from $26.3 billion-$28 billion.

Net income attributable to Qualcomm plunged 46 percent to $1.05 billion, or 63 cents per share in the second quarter ended March 29.

Excluding items, the company earned $1.40 per share.

Revenue rose 8.3 percent to $6.89 billion.

Qualcomm’s shares were trading at 67.40 after the bell.