Qualcomm 's quarterly profit fell 51.5 percent due to higher costs.
The company said on Wednesday net income fell to $363 million or 24 cents per share in the three months ended March 25, from $749 million or 50 cents per share a year earlier.
Total revenue rose 4.9 percent to $5.26 billion.
While revenue from Qualcomm's chips division rose 6 percent in the three months ended March 25, revenue from the licensing business plunged 44 percent, reflecting the withholding of revenue in a high-profile patent battle with Apple.
"Our fiscal second quarter results reflect better than expected performance in our semiconductor business and lower operating expenses," said Steve Mollenkopf, CEO of Qualcomm Incorporated. "Looking forward, we remain committed to driving improved performance in fiscal 2019, consistent with our prior guidance. We are making good progress on executing our $1 billion cost plan, are focused on closing our pending acquisition of NXP and are well positioned to drive the global commercialization of 5G."
Despite the strong quarter for chip sales, the company forecasts growth of about 5 percent in modern mobile handsets for the remainder of the year, which is lower than anticipated. Handset prices, however, are higher than expected.
Qualcomm's first and second quarters of fiscal 2018 GAAP and Non-GAAP results were negatively impacted by the company's dispute with Apple and its contract manufacturers (who are Qualcomm licensees), as well as the a dispute with another licensee. Qualcomm said it did not record any QTL revenues in the first or second quarters of fiscal 2018 for royalties due on sales of Apple's or the other licensee's products. The company added it expects Apple and contract manufacturers to withhold payments until the dispute is resolved.
Qualcomm has entered into a definitive agreement to acquire NXP Semiconductors N.V. (NXP) for estimated total cash consideration to be paid to NXP's shareholders of $44 billion. NXP is a leader in high-performance, mixed-signal semiconductor electronics in automotive, broad-based microcontrollers, secure identification, network processing and RF power products.
The transaction is subject to receipt of regulatory clearance from the Ministry of Commerce in the People's Republic of China and other closing conditions, including the tender of at least 70% of the issued and outstanding common shares of NXP in the offer.
The recent U.S. ban on exports to China's ZTE would also be a hit for Qualcomm. The company said it expects the loss of business with ZTE to lower its profits by 3 cents per share next quarter.
In an effort to preserve its licensing revenue, Qualcomm said it would cap the phone price that is the basis of the revenue calculation at $400. More expensive phones, which can sell for $1,000, would still be treated as $400 for the purpose of the Qualcomm license fee.