Shares of Qualcomm ( QCOM) surged 20% Thursday after the company settled a patent-licensing dispute with Nokia ( NOK) and offered financial guidance for the fourth fiscal quarter and fiscal year.

Late Wednesday, Qualcomm announced it has settled all litigation with Nokia and entered a new agreement with the handset maker, enabling both companies to make and sell products that use cellular network technology, including the 3G and 4G standards. In addition, Nokia is withdrawing its complaint to the European Commission.

"Not only does the new license include all technologies but it also sets a bar for the whole industry, establishing Qualcomm as a company all must deal with to be a player in current 3G and future 4G technologies," writes Oppenheimer analyst Ittai Kidron, in a research note. "Qualcomm's business model has been validated and investors' concerns are now put to bed."

The news came as the San Diego chipmaker said that net income fell 6% in the fiscal third quarter to $748 million, or 45 cents a share, from $798 million , or 47 cents a share, a year earlier. Excluding various items, the company earned 55 cents a share, in line with analysts' expectations, according to Thomson Reuters.

Revenue in the quarter grew 19% year over year to $2.76 billion, slightly ahead of Wall Street's average forecast of $2.71 billion. Qualcomm added that free cash flow fell 14% to $844 million.

Looking ahead, Qualcomm said fiscal fourth-quarter revenue will be in a range of $2.5 billion to $2.7 billion with earnings of 49 cents to 51 cents a share. Qualcomm says the guidance is based on its current business outlook and comes prior to accounting for the agreement with Nokia. On average, analysts expect a profit of 54 cents a share on revenue of $2.7 billion.

Qualcomm said it estimates shipments of approximately 114 million to 118 million CDMA devices in the quarter at an estimated average selling price of approximately $215 per unit. About 89 million CDMA devices were shipped in the year-ago quarter.

For the fiscal year, Qualcomm expects pro forma revenue to be in a range of $10.3 billion to $10.5 billion with earnings per share of approximately $2.11 to $2.13.

The company added that it's at an early stage of working through the mechanics of the Nokia settlement, and that a preliminary estimate of incremental diluted earnings per share is approximately 7 cents to 13 cents. Wall Street is expecting Qualcomm to report earnings of $2.15 a share for the fiscal year on revenue of $10.46 billion.

"In calendar year 2008, we continue to see approximately 30% year-over-year growth for CDMA-based device shipments," said Qualcomm's CEO Dr. Paul E. Jacobs in a statement. "The fundamental drivers of our business remain strong, and we are raising our fiscal 2008 revenue and earnings per share estimates."

Qualcomm added that it continues to be engaged in litigation with rival Broadcom ( BRCM) and that it has included the estimate of the impact of the ruling by the Federal District Court in Santa Ana, Calif., in its outlook for fiscal 2008.

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