Qualcomm Fans the Wireless Flames
Updated from 7:54 a.m. EST
The worldwide cell-phone party continues as
Qualcomm
(QCOM) - Get Report
dials up higher growth projections.
For the second time in two months, the San Diego wireless tech giant
raised its sales guidance based on stronger than expected demand for chips and phones.
Investors cheered the news, sending Qualcomm shares up $3.57, or 6%, to $62.97 in midmorning trading Monday.
"I think we are going to see extremely strong demand for handsets this year," says Harris, Nesbitt Gerard analyst John Bucher, who has a buy rating on the stock. Harris, Nesbitt Gerard has no underwriting ties to Qualcomm.
Bucher said he was especially encouraged by the jump in Qualcomm's revenue forecast. "The biggest upside surprise for us was that they guided for sales of 1 million more chipsets than they had previously," says Bucher.
Analysts were quick to draw a correlation between higher chip volumes and dramatically higher sales and profit forecasts. Qualcomm fans are sure to take comfort in the apparent resilience of the company's royalty-fueled growth engine.
Excluding results from its investment arm, the company now expects a 20% year-over-year increase in profits on 17% sales growth in the current quarter.
Qualcomm owns many patents to the code division multiple access or CDMA wireless standard. The company benefits from the sales of its phone chips, the licensing of its wireless tech patents and royalties from all CDMA phone sales.
The fact that higher volumes are yielding presumably high margins suggests Qualcomm is not facing any immediate threat of erosion on its bottom line.
Qualcomm's financial update coincides with the opening of the 3GSM wireless industry convention in Cannes, France, Monday.
The European telcos are expected to give updates on upgrade plans as they expand network data capabilities. Outfits like
Ericsson
(ERICY)
,
Nokia
(NOK) - Get Report
and
Motorola
(MOT)
will be hawking their gear and angling a piece of the spending action.