Qualcomm says chip demand better, shares rise
(UPDATE: Recasts, adds details, edits throughout)
By Yukari Iwatani
CHICAGO, Feb 25 (Reuters) - Wireless technology firm Qualcomm Inc. (NasdaqNM:QCOM - news) on Monday reported
better-than-expected demand for its cell-phone chips, easing investor concern about the company and the industry and boosting
Qualcomm shares.
The shares rose as high as $35.81 on the Nasdaq stock market in early
trading before pulling back a bit to $34.50, up $1.80, or 5.5 percent. Analysts
said the strength in Qualcomm contributed to the overall rise in the stock
market.
``Solid visibility into (chip) shipments may be driving Qualcomm's
confidence,'' Tim Luke, wireless equipment analyst for Lehman Brothers,
said in a research note. ``We believe that investors may be encouraged by
Qualcomm's announcements this morning.''
Mark Roberts, an analyst with First Union Securities, said Qualcomm's
statements may be a sign that the wireless industry is turning up. ``I think
you could infer that things are not getting worse and we're seeing some
signs of improvement,'' he said.
Qualcomm owns all of the relevant patents to CDMA (code division multiple
access) technology, the dominant standard in the United States for wireless networks and the No. 2 standard in the world.
The company has been suffering from a broad slowdown in the telecommunications equipment industry as the economy has
slowed and customer demand for its products has fallen.
Last month Qualcomm forecast lower revenues and earnings for the current quarter, its fiscal second quarter, due to the usual
post-holiday weakness in its business. It forecast earnings of 19 cents to 21 cents a share. At the time, analysts were expecting 24
cents, according to Thomson Financial/First Call.
Qualcomm on Monday narrowed its earnings forecast to 20 cents a share, in line with analysts' revised forecasts.
``We continue to see positive momentum in the build-out of 3G (third-generation) CDMA networks based on CDMA 2000 1X
around the world,'' Qualcomm Chief Executive Irwin Jacobs said in a news release.
CDMA 2000 1X is Qualcomm's third-generation technology that promises high-speed always-on Internet access and better voice
capacity. Current digital networks are considered second-generation; analog networks are considered first-generation.
Qualcomm said it expects to ship chips at the high end of its estimate of 13 million to 14 million for its second quarter, ending
March 31. Shipments of CDMA 2000 1X chips are expected to surpass its original estimate by one million, it said.
``We believe this strength in demand demonstrates the strong acceptance of 3G CDMA,'' Jacobs said.
The company was to hold a conference call for investors Monday afternoon. First Union's Roberts said he will be looking for the
company to shed light on its outlook for third-quarter results, which he believes will improve from the second quarter.
Qualcomm said its balance sheet remains strong with about $2.4 billion in cash and essentially no debt.
The San Diego-based firm is among companies that have come under scrutiny in recent weeks over their accounting practices.
Qualcomm defended its accounting practices after its shares tumbled earlier this month. It had no further comment on the subject
in its Monday statement.
(Additional reporting by Caroline Humer) |
