3G Growth Raises Qualcomm Forecast

Higher-than-expected shipments of handset chips and more expensive phones led Qualcomm to raise its revenue and profit forecasts for the current quarter.

The wireless technology company now expects to report pro forma revenue slightly higher than its previous forecast of US$2.5 billion to $2.7 billion for the quarter, citing expected shipments of about 86 million of its MSM (Mobile Station Modem) chips. On April 23, after reporting its second-quarter results, Qualcomm had forecast shipments of 85 million to 88 million chips.

Pro forma diluted earnings per share are now pegged at $0.54 to $0.55, versus the earlier estimate of $0.50 to $0.52. The pro forma figure excludes some costs associated with share-based compensation, research and development, taxes from prior years and other factors.

The worldwide growth of 3G (third-generation) mobile technology is driving Qualcomm's good fortune, the company said. In addition to making its own chips for CDMA (Code-Division Multiple Access) and Wideband CDMA phones and networks, the San Diego company owns numerous patents in those technologies and collects royalties from hardware vendors.

Demand has been higher than expected for Qualcomm's HSPA (High-Speed Packet Access) and EV-DO (Evolution-Data Optimized) chips, as well as carrier network upgrades, Qualcomm said.

The third-quarter results are heavily influenced by product shipments in the previous quarter, ended in March, because a majority of licensees report royalties the quarter after their products ship, according to Qualcomm. In the March quarter, Qualcomm estimates, there were 107 million CDMA and WCDMA devices shipped. That's well within a previous estimate of 105 million to 109 million and up significantly from 86 million a year earlier.

And even as unit shipments of 3G handsets grow, the average selling price of the phones was also higher than expected. Qualcomm now estimates the average selling price of those phones at $226, up from a previous estimate of $223 million.

The company also raised its profit forecast for the full fiscal year, which will end in late September. It now expects annual earnings per share of $2.09 to $2.13, up from an estimate of $2.04 to $2.09.

Qualcomm will announce its fiscal third-quarter results on July 23.

Not counted in the forecasts are royalties Qualcomm believes are owned by Nokia, the world's largest mobile phone vendor. Because the two companies are embroiled in a legal dispute over royalties, Qualcomm is not recording royalty revenue associated with Nokia's sales after April 9, 2007.

Qualcomm's stock rose with the new estimate. In afternoon trading on Thursday, its shares (QCOM) on the Nasdaq were up $2.82 at $49.13.