Qualcomm Beats Targets

The company sees a new technology rollout slowing, but investors shrug off the news.
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Qualcomm

(QCOM) - Get Report

posted stronger-than-expected third-quarter earnings Wednesday, citing rising sales of high-end handsets.

The San Diego-based tech shop trimmed its 2005 handset-shipment guidance, saying the conversion to third-generation wireless technology isn't going as quickly as planned. But Qualcomm raised its full-year earnings target and maintained revenue guidance, boosting shares 3% in late trading.

For the quarter ended June 26, Qualcomm earned $560 million, or 33 cents a share, up from the year-ago $486 million, or 29 cents a share. Excluding the results of the company's strategic ventures unit, Qualcomm made 28 cents a share in the latest quarter, 3 cents ahead of the Thomson First Call analyst consensus estimate.

Revenue hit $1.36 billion in the latest quarter, up 1% from a year ago but down 1% from second-quarter levels.

The company guided toward pro forma earnings of $1.14 a share for the year, on revenue of $5.6 billion. For the full fiscal year ending in September, analysts are expecting Qualcomm to post net income of $1.12 a share on sales of $5.57 billion.

"They beat on earnings, they beat in chips -- the sentiment may go up since there was no disaster," says one New York hedge fund manager who owns the stock. "The one negative was 3G. They originally targeted 50 million 3G handsets, and now it looks like that may come down to about 45 million."

Indeed, Qualcomm guided to calendar 2005 shipment of 203 million handsets using its code division multiple access and wideband CDMA standards, down from the previous 213 million-unit target.

"We are decreasing the estimate for calendar 2005 handset shipments by approximately 5%, which is largely attributable to our expectations that the sale of WCDMA handsets in Europe in the second half of the calendar year will be less than previously estimated for the year," Qualcomm said.

In after-hours trading, Qualcomm rose $1.12 to $37.21.