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Qualcomm Raises Guidance

A drop in average selling prices weighs on shares, though.

Updated from 9:53 a.m.

Qualcomm

(QCOM) - Get Report

raised its fiscal fourth-quarter guidance based on solid chip sales and growth in demand for 3G phones.

But shares fell amid worries about the company's legal disputes with wireless titans such as

Nokia

(NOK) - Get Report

and

Broadcom

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.

The San Diego wireless tech shop says it now expects its adjusted earnings to be between 52 cents and 53 cents a share. Qualcomm excluded a nickel a share from its pro forma profit number to account for royalties it does not expect to collect from Nokia due to a standoff over licensing agreements.

The new profit range is above the 49 cents the company had previously projected and more than the 50 cents analysts were looking for, according to Reuters Research.

But investors were not impressed with the less than full-throttle growth at Qualcomm, and nit-pickers saw too much additive in the profit mix.

"While the pre-announcement shows that business fundamentals appear solid, they do not appear to be accelerating, as the quality of the earnings upside was poor, in our opinion, mostly coming below the line," JPMorgan analyst Ehud Gelblum wrote in a research note Tuesday.

Gelblum, who rates the stock neutral, pointed to profit enhancements like a lower tax rate and the $1.25 billion in stock repurchases this quarter that took about 30 million shares out of circulation and help beautify the bottom line.

The company says sales for the quarter ending this month will be higher than the $2.25 billion that it had originally forecast and that analysts were looking for.

"We are expecting another successful quarter as worldwide demand for third-generation devices and services continues to accelerate," CEO Paul Jacobs said in a press release.

Qualcomm says about 92 million CDMA phone were shipped at an average selling price of $218 in the quarter ended in June. That means shipments are up 31% over year-ago levels. But the average selling price per phone was below the $222 target the company had predicted.

Qualcomm shares fell 65 cents to $40.99.