Qualcomm Heats Up

The shares climbed after the chip maker raised its sales and earnings forecast for the coming quarter

Qualcomm (QCOM), which has been embroiled in legal battles recently, sees better times this spring. On Mar. 13, the maker of chips for wireless phones forecast that earnings and sales during the three months ending in June will be better than expected.

The company says it sees revenue of $2.1 billion to $2.2 billion during the second fiscal quarter ending in June, compared to the previously forecast $2.0 billion to $2.1 billion. Earnings per share will be between 41 cents and 42 cents, compared to the 35-37 cents range previously forecast.

"We are expecting a particularly successful quarter, reflecting strong growth in chipsets, handsets, and applications and services," CEO Paul E. Jacobs said in a press release Mar. 13. "Reports from our licensees for December quarter handset shipments reflected greater than expected strength in Europe and North America."

Now the company thinks it will ship around 60-61 million Mobile Station Modem chips during the June quarter, compared to a prior estimate of 55-57 million units.

Investors bid up the company's shares 4.3% to $41.83 on the Nasdaq Mar. 13, bucking a down day for the overall market. The company's stock price has risen in recent months from its low of the year at $32.76 on Aug. 10.

Investors have been watching Qualcomm's sales closely as the company has been embroiled in legal battles. Cell-phone giant Nokia (NOK), a client whose license agreement with Qualcomm expires in April, 2007, claims Qualcomm is using Nokia's 1,800 patents for wireless devices to extract outsize royalties on products. Meanwhile, Qualcomm's chipmaker rivals, led by Broadcom (BRCM), say they are being denied licenses to key technologies at reasonable rates (see BusinessWeek, 10/30/06, "Like Father, Like Son at Qualcomm").

"Despite our view of near-term customer and legal risks with with respect to Nokia and other firms, we would hold QCOM shares," said Standard & Poor's equity analyst Ken Leon in a research note. Leon raised his fiscal year 2007 earnings per share estimate to $1.70 from $1.65 on Mar. 13, citing expectations of sales growth in the 12-13% range. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

Qualcomm also announced that it will increase its dividend from 12 cents to 14 cents per share for quarterly dividends payable after Mar. 30, 2007.

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