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Qualcomm Reports 2nd-Qtr Earnings More Than Triple (Update1)
Qualcomm Reports 2nd-Qtr Earnings More Than Triple (Update1) (Adds analysts' comments,
details from results.)
San Diego, April 20 (Bloomberg) -- Qualcomm Inc., which makes cellular telephones and network
equipment, said fiscal second-quarter profit more than tripled, beating expectations, on strong
demand for phones and the semiconductors that run them.
Profit from operations rose to $65.2 million, or 82 cents a share, from $18.6 million, or 25 cents, a
year earlier. The company was expected to earn 59 cents a share in the quarter ended March 28,
the average estimate of analysts polled by First Call Corp. Estimates ranged from 50 cents a share
to 64 cents.
Qualcomm is seeing strong demand for its new digital cell phones and computer chips used by
other phone makers as more wireless carriers around the world adopt Qualcomm's technology.
Excluding Qualcomm's cellular-network business, which it agreed to sell to Swedish rival Ericsson
AB last month, Qualcomm earned $1.20 a share. The company said it expects earnings in future
quarters to match or beat that. ''Estimates are going to have to go up significantly,'' said Timothy
Luke, an analyst at Lehman Brothers Inc., who rates Qualcomm ''strong buy.'' ''This stock is
going to jump tomorrow morning.''
The company is currently expected to earn 71 cents a share in the fiscal third quarter, $2.75 for
fiscal 1999 and $3.76 for fiscal 2000, according to First Call.
Soaring Stock
Qualcomm shares have almost tripled so far this year, pushing its market value to more than $10
billion. The results were reported today after the close of trading. The shares rose 16 to 140 5/8
before the announcement.
After a charge of $107.8 million, or $1.41 a share, for a restructuring and the sale of its
cellular-network business, Qualcomm had a loss of $42.6 million, or 59 cents.
The company last month agreed to settle a patent dispute with Ericsson, the world's No. 3
cellular-phone maker, and sell its unprofitable network-equipment business to focus on phones
and chips. ''The events of the second quarter proved to be pivotal in our company's 14-year
history,'' said Irwin Jacobs, Qualcomm's chairman and chief executive.
Qualcomm expects another charge of about $100 million in the current quarter, after the sale is
completed.
Global Spread
Qualcomm said it's seeing strong demand in North America and South Korea and rising demand in
Latin America, especially Brazil, and Japan. The company also expects to announce that cellular
providers in China, the largest potential market, plans to use Qualcomm technology in their
networks shortly. ''In January, we said the market for wireless products in general and products in
particular appeared strong,'' Jacobs said on a conference call with analysts and investors. ''The
market again appears strong.''
Revenue for the period ended March 28 rose 23 percent to $932.4 million from $760.6 million.
Sales of phones and chips rose 24 percent during the quarter to $774 million.
The company warned that demand is so strong, it may run into problems getting components for
its phones. There aren't currently any shortages, Jacobs said.
Royalty fees from other companies that use Qualcomm's technology rose 10 percent to $77
million.
The company said it expects royalty payments, which rose 73 percent from the fiscal first quarter,
to climb further. That bodes well for higher profits, analysts said. ''Royalty revenues fall straight to
the bottom line,'' said Mark McKechnie, an analyst at NationsBanc Montgomery Securities.
NYSE/AMEX delayed 20 min. NASDAQ delayed 15 min.
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