To: Eric L who wrote (3914 ) 5/6/2006 12:01:31 AM From: elmatador Respond to of 9255 Qualcomm CEO: Winning Battle In Low-End Phones CDMA, technology are outselling phones with GSM technology in the sub-$50 category, Jacobs said NEW YORK -(Dow Jones)- Qualcomm is winning the battle of low-end phones in key emerging markets, Chief Executive Paul Jacobs said Thursday. In India, phones equipped with Qualcomm's code division multiple access, or CDMA, technology are outselling phones with GSM technology in the sub-$50 category, Jacobs said at the company's analyst day in New York. "The sub-$50 market is a key battleground," Jacobs said. Qualcomm raised its earnings expectations Wednesday partly based on stronger sales of low-end phones. It expects third-quarter earnings of 38 cents to 40 cents a share, above its previous target of 36 cents to 38 cents a share. It also expects revenue at or above the high end of its target of $1.77 billion to $1.87 billion. One of the reasons behind the strength in India is the aggressive nature in which the local carriers in the country are pushing the phones, Jacobs said in an interview with Dow Jones Newswires. The sub-$50 category is important because that's where the volume is, allowing carriers to spread their network costs over a wider subscriber base. But even in developing markets, consumers are looking to buy better phones. "Phones are a status symbol - they won't buy the cheapest phones," he said. Jacobs noted that the average selling price of CDMA phones are higher than for GSM phones. But that's partly because GSM carriers are skewed to the lower-end customers. As the local economy improves and cellphones are more widely accepted, the hope is that the customer base will gradually move up to more expensive phones. The high-end business, which includes third generation, or 3G, phones, is working well, Jacobs said. In Japan, 3G has overtaken 2G, and there is a similar trend forming in Europe. Qualcomm attributed part of its rosier expectations on strength in evolution-data only, or EV-DO, phones used by the likes of Verizon Wireless and Sprint Nextel Corp. (S). Even if the average selling price for 3G phones falls, Qualcomm receives a higher percentage of royalty revenue, he said. Unlike many other telecommunications-equipment providers, Qualcomm isn't pressured to join in the consolidation, seen most recently by the announcement of the merger of Alcatel and Lucent Technologies. Jacobs said Qualcomm would continue to look at smaller acquisitions, but didn't rule out a major deal. "Mega-mergers are hard to digest," he said. "It's not something we're focusing on. But we like to keep our options open." -By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com (END) Dow Jones Newswires