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Qualcomm Forecasts Revenue That May Exceed Estimates

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Paul Jacobs, chairman and chief executive officer of Qualcomm Inc. Photographer: Jin Lee/Bloomberg

Jan. 26 (Bloomberg) -- Qualcomm Inc., the biggest maker of mobile-phone chips, posted first-quarter sales and profit and forecast revenue for the current period that topped analysts’ estimates, signaling demand for smartphones is increasing.

Sales in the current quarter will be $3.45 billion to $3.75 billion, San Diego-based Qualcomm said today in a statement. That compares with $3.14 billion, the average of estimates compiled by Bloomberg. The shares jumped in late trading.

Qualcomm, whose chips supply the radio function in phones, benefits as consumers buy more devices that can surf the Web. Smartphones require extra processors to run programs, and their higher price generates more licensing revenue for the company, which has patents covering much of the technology in 3G phones.

“This was a fantastic quarter by a company that is benefitting from multiple tail winds,” said Bill Kreher, a St. Louis-based analyst for Edward Jones. He recommends buying Qualcomm stock and doesn’t own the shares. “The outlook gives us confidence in the long-term road map.”

Qualcomm climbed as much as 6.5 percent to $55.25 in extended trading. The shares rose 34 cents to $51.86 at 4 p.m. New York time on the Nasdaq Stock Market. They gained 7 percent last year.

The company also increased its full fiscal-year outlook. Revenue will be $13.6 billion to $14.2 billion, Qualcomm said. That compares with an earlier forecast of $12.4 billion to $13 billion. Profit excluding some items will be $2.91 to $3.05 a share, up from $2.63 to $2.77 previously.

Net Income

Net income rose 39 percent to $1.17 billion, or 71 cents a share, in the three months ended Dec. 26, from $841 million, or 50 cents, a year earlier. Sales increased 25 percent to $3.35 billion. Analysts had predicted first-quarter profit of 59 cents a share on revenue of $3.2 billion.

“It was very much the developed markets -- North America, Japan and Korea,” Chief Financial Officer Bill Keitel said in a telephone interview. “Smartphones sold there tend to have a higher average selling price.”

Earlier this month Apple Inc. said it will begin offering a version of its best-selling iPhone through Verizon Wireless. That probably increased Qualcomm’s baseband chip shipments by about 3 percent last quarter compared with the previous three months and will add a further 2 percent this quarter, according to FBR Capital Markets analyst Craig Berger.

Qualcomm gets the majority of its revenue from chip sales and the bulk of its profit from licensing. The company is trying to expand the reach of its chips beyond radios with a product called Snapdragon.

That chip is now running smartphones that use Google’s Android operating system. Qualcomm is also trying to sell it to makers of tablet computers.

(The company held a conference call to discuss the results at 4:45 p.m. New York time. Go to {LIVE <GO>} to hear a replay.)

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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