Qualcomm, Inc. Plummets On Earnings Miss, FTC Probe

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Qualcomm, Inc. (NASDAQ:QCOM) suffered a steep decline after the company disclosed that it is facing an investigation from the Federal Trade Commission (FTC) on Thursday.

The stock price of the company was also negatively affective by its earnings results for the fourth quarter that missed the consensus estimates of Wall Street analysts.

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The shares of Qualcomm, Inc. (NASDAQ:QCOMM) were trading $68.61 per share, down by more than 11% at the time of this writing around 11:18 A.M. in New York.

Qualcomm licensing business under investigation

According to Qualcomm, Inc. (NASDAQ:QCOM), the FTC sent a notice of investigation on September 17. The commission’s investigation is focused on its licensing business including a potential breach of FRAND commitments.

The FTC could impose a penalty against Qualcomm, Inc. (NASDAQ:QCOM) if a violation if found. The commission could also require the company to modify its licensing practices. The company emphasized that the outcome of the investigation is hard to predict or what remedies will be imposed by the FTC because it is still in its early stages.

During an earnings conference yesterday, Steve Mollenkopf, CEO of Qualcomm, Inc. (NASDAQ:QCOM) said, “We are fully cooperating with these agencies and believe our practices comply with the laws of our countries, but given that these matters are in their early stages, it is difficult to predict what, if anything, will come of them.”

Other legal woes

Qualcomm, Inc. (NASDAQ:QCOM) is confronting other legal issues including the investigation by the National Development and Reform Commission  (NDRC) in China related to allegation of monopoly practices. The NDRC’s investigation is also focused on its licensing business.

The Los Angeles Regional Office of the Securities and Exchange Commission (SEC) sent a Wells Notice to Qualcomm, Inc. (NASDAQ:QCOM) on March 13, 2014. The notice indicated that the commission’s staff in Los Angeles made a preliminary determination to recommend a civil enforcement action against the company for potential violations of the U.S. Foreign Corrupt Practices Act (FCPA).  Qualcomm responded with a Wells Submissions explaining its reason why it did not commit any wrongdoing.

Qualcomm 4Q earning miss consensus estimate

Yesterday, Qualcomm, Inc. (NASDAQ:QCOM) released its fourth quarter financial results. The company reported adjusted earnings of $1.26 per share, lower than the $1.31 per share consensus estimate.

The company’s earnings guidance for the first quarter FY15 was lower than expected. Qualcomm, Inc. (NASDAQ”QCOM) expected to achieve adjusted earnings in the range of $1.18 to $1.30 per share compared with the $1.43 per share estimated by analysts.

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