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Merrill Keeps Buy on Qualcomm

Qualcomm (QCOM) may have royalty issues. The company sees 4% to 6% sequential revenue growth in the fourth quarter. Merrill Lynch kept its buy rating on the shares.

Analyst Tal Liani says the news reaffirms his thesis on continuing strong outlook for the company's CDMA and WCDMA technologies; the royalty accounting change, if implemented, could be a one-time accounting event that would bring Qualcomm's reported performance more in-line with end user demand. He says the company may be changing its accounting policy due to faster-than-expected pick up in WCDMA end-user demand, especially in Europe. He thinks the new proposed policy should better align revenue recognition with its cash flow. Liani views weakness in the stock as a buying opportunity. He sees EPS of $1.09 on fiscal 2004 (ending September) and $1.03 in fiscal 2005. He has a $45 target.

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