Qualcomm [NASDAQ:QCOM] reported earnings for the second fiscal quarter of 2013. Qualcomm reported revenues of $6.12 billion an increase of 24%  over the same quarter a year ago and 2% sequentially over 1Q 2013 (calendar 4Q 2012). Profit was $1.87 billion, up 16% year over year and down 2% sequentially, which was expected by analysts and investors alike due to Qualcomm’s first fiscal quarter (fourth calendar) generally being their strongest of the year. 

Qualcomm’s different business segments had mixed quarters with QCT (their chip business) did $3.916 billion in revenue for 2Q 2013, up 28% from the same quarter a year ago and down 5% from the prior quarter. Their QTL (licensing business) did $2.057 billion in revenue which represented an increase of 19% over the quarter a year ago and 17% over the previous quarter. QWI (their wireless and internet divisions) reported $155 million in revenues down 3% over the same quarter a year ago, but up 6% over the previous quarter.

Qualcomm’s outlook for fiscal 3Q 2013 also shows that the company expects to increase their revenue 25-36% to $5.8 billion to $6.3 billion with a non-GAAP EPS of $0.97-$1.05, a lower expectation than what the consensus was among analysts. Qualcomm did, however, adjust their outlook for the fiscal year 2013 upward to $24 billion to $25 billion from $23.4 billion to $24.4 billion, an increase of $600 million or an increase of 4%.

Considering the fact that Qualcomm is trying very hard to expand into the developing markets, they have many challenges to overcome, especially in China. They have to deal with technology licensing and decreasing ASPs on chips shipping to Chinese OEMs. As a result of Qualcomm’s earnings announcement, their stock is currently down $4.25 to $61.75 a decrease of 6.44% in after hours trading. This is in the face of the fact that Qualcomm’s chips will be shipping in the HTC One and the US version of the Samsung Galaxy S IV which both use a Snapdragon 600.

Qualcomm is currently the dominant force in mobile, but with Microsoft sputtering on Windows 8 RT they’ve lost a huge part of their tablet play that would enable them to sell higher ASP chips in tablets. Admittedly, they appear to be fairly conservative on their expectations for Windows 8 RT, however, Windows Phone is also has some growth issues. Qualcomm’s success will likely still rest on the back of Android devices and for as long as Android continues to grow, Qualcomm has a chance. The only worrying factor is that if Qualcomm becomes too successful in China, their revenue may grow significantly, but they will also take a hit in terms of ASP and margin as well. They have to be careful with their product mix going forward as they chase after the developing markets.