Qualcomm Boosts Guidance

The wireless company's shares surge after a strong first-quarter forecast.
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Qualcomm

(QCOM) - Get Report

surged 6% late Wednesday after the company guided up for the first quarter, citing strong adoption of its cell-phone standard.

For its fourth quarter ended Sept. 25, the San Diego-based purveyor of code division multiple access, or CDMA, wireless technology made $538 million, or 32 cents a share, up from the year-ago $393 million, or 23 cents a share. Revenue rose to $1.56 billion from $1.12 billion a year earlier. Free cash flow, or net cash provided by operating activities less capital expenditures, rose 31% from a year ago to $838 million.

"Our record financial results reflect the accelerating migration to CDMA throughout the world," said CEO Paul Jacobs. "As of September 2005, there were approximately 159 operators offering third generation services in 71 countries with over 200 million subscribers."

Analysts surveyed by Thomson First Call were looking for a 33-cent profit on sales of $1.54 billion. But investors were happy to overlook the penny-a-share miss as the company boosted its guidance for fiscal 2006.

The company raised its fiscal first-quarter revenue target to $1.74 billion, reflecting expected 11% sequential growth. Analysts were expecting sales of $1.66 billion, or about 6% sequential growth, according to a Reuters Research tally.

"These are great, great numbers," says one hedge fund manager who owns the stock. "Every year, they give guidance that is in line with the Street, and they always blow by it. And I think they'll do it again this year."

"Looking forward, we anticipate 2006 to be yet another strong growth year with new CDMA handset shipments growing approximately 30% year-over-year," Jacobs said. "The wireless market continues to evolve at a rapid pace and Qualcomm will continue increasing R&D investments in fiscal 2006 to capture the many opportunities ahead and maintain or extend our leadership position in the market."

On Wednesday's postclose conference call, Qualcomm is expected to address a

complaint brought to the European Commission last week by rivals

Nokia

(NOK) - Get Report

,

Ericsson

(ERICY)

,

Texas Instruments

(TXN) - Get Report

and

Broadcom

(BRCM)

that accuses the CDMA standard bearer of anticompetitive licensing practices.

The challengers argue that Qualcomm uses it dominance in wireless technology patents to overcharge for licensing fees. The opponents urged the European Union to investigate Qualcomm's practices. Qualcomm has called the charges meritless and says they were brought by a group of competitors that fears they will be edged out of the next generation of wireless gear.

Late Wednesday, Qualcomm shares rose $2.51 to $42.