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Qualcomm Beats Earnings Estimates, Lowers Handset Sales Predictions

Slower licensing and chip sales bring revenue down sequentially and year over year.

Updated from 5:09 PM

Qualcomm

(QCOM) - Get QUALCOMM Incorporated Report

finished the June quarter with its dignity intact, notching earnings of 22 cents a share, narrowly beating Street estimates of 21 cents a share. The wireless-technology licenser squeezed $640 million in pro forma revenue out of a stalling market for mobile phones in its fiscal third quarter, smoking analyst consensus predictions of $603 million in revenue.

Investors were expecting rough returns, and Qualcomm's results showed ugly conditions for the quarter. Qualcomm's revenue was down considerably year over year (from $714 million) and sequentially (from $713 million) because of missing business from cash-strapped satellite venture

Globalstar

, as well as a slowdown in licensing and chip shipments. If $241 million in charges relating to investments in Brazil's

Vesper Companies

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and $185 million in tax expense are included in its quarterly performance, Qualcomm lost $275 million.

Qualcomm eased awkwardly into a mixed outlook for the fourth quarter. After the technology company's gross margins slipped 1% from the second to the third quarter to 64%, management expects them to climb again in the fourth quarter. The company predicted revenue would grow 10% in the fourth quarter and earnings would climb to 25 cents a share.

Average selling prices on chipsets should go up in the next quarter as well, but the company forecast it would ship fewer than 14 million chipsets during that period. In April, what visibility Qualcomm had on the habits of wireless consumers didn't thrill the company, leading it to revise its guidance for the third quarter. Qualcomm achieved its revised goal to sell 14 million chipsets, down from an original third-quarter forecast of 16 million.

The company once again updated its outlook for 2001 handset sales using CDMA (code division multiple access) technology, pegging the number at 75 million. Qualcomm took the figure from 90 million to 80 million when it reported February quarter earnings. Qualcomm's investment income for the quarter slowed from $91 million in the second quarter to $68 million in the third. The company invested $296 million in the quarter on carriers and capital expenditures.

CEO Irwin Jacobs spoke hopefully and deferentially of the newest CDMA customer,

China Unicom

, and eagerly elaborated on potential 2002 revenues from that country and its CDMA-running neighbors. India, Korea and Latin America were also lavished with his attention. Poor Europe would have to wait for compliments because spending has been pushed out for CDMA-based third-generation systems.

Jacobs also bid farewell to COO Richard Sulpizio, who took a bow on the call after 10 years at Qualcomm, reaffirming that his departure was due to the canceled spinout of the company's chip business and his desire to be the head honcho in his own right. Analysts were nonplussed by the canceled spinoff and asked few questions about reorganization plans.

Qualcomm closed up 7 cents, or 0.1%, to $59.66 during Thursday trading. It was up almost 4% to $61.90 after hours following the announcement.