Qualcomm May Have Just Signed Up The Last Of The Top Five Chinese OEMs

J.P. Morgan's Rod Hall reported that QUALCOMM, Inc. QCOM has announced post market close on February 18 that it has entered into a new 3G and 4G license agreement with Lenovo Group Limited (ADR) LNVGY for China.

Qualcomm also stated that the royalties were consistent with the terms of the NDRC deal.

“With this deal, we believe that QCOM has now signed agreements with all top 5 Chinese OEMs. We believe this deal represents upside to the company’s QTL revenue estimates for FY16,” Hall said.

Qualcomm had guided to FY16 QTL revenue of $7.3-8.0 billion, the low end of which only includes run rate deals that existed on January 27, 2016 and excludes prior period catch up payments.

Hall believes that the catch up payments could be worth about $214 million for FY16, excluding Lenovo.

“This makes the “true” bottom end of the guidance range just over $7.5bn though we note that this includes LG revenue of $450 million, which may or may not materialize this year,” according to the J.P. Morgan report.

Even if the LG revenue returns did not materialize during 2016, the low end of the guidance range would still be above $7 billion, which would be in-line with or ahead of the current consensus expectations.