Skip to main content

Updated from 6:23 p.m. EDT

What tech downturn?

Strong sales of cell phones using

Qualcomm's

(QCOM) - Get QUALCOMM Incorporated Report

code division multiple access wireless technology in China and India drove the company's first-quarter profit and sales sharply higher.

The San Diego company, which pioneered CDMA technology used by

Verizon Wireless

and

Sprint PCS

(PCS)

, also raised forecasts for the next quarter and full year.

Qualcomm reported earnings of $241 million, or 30 cents a share, according to generally accepted accounting principles, up from $139.2 million, or 17 cents a share, a year earlier. Sales were $1.1 billion, up from $692.6 million a year ago.

TheStreet Recommends

Excluding losses in its strategic investments, the company churned out earnings of $345 million, or 42 cents a share, an 83% improvement over year-ago earnings of $190 million, or 23 cents a share.

Qualcomm reported "pretty clean numbers," said Deutsche Bank Securities analyst Brian Modoff. "There weren't too many one-time charges. It was pretty straight." Deutsche Bank has done investment banking for Qualcomm in the past. Modoff does not own shares.

"It's a beacon hope in a sea of wireless miseries," Modoff said.

The company now expects fiscal second-quarter earnings per share to be 34 cents to 35 cents, a 50% on-year increase from the same period last year. The figures are based on the assumption that it will ship 27 million chips. A company executive said it already was completely booked for the chip-shipment targets for the second quarter.

For the full fiscal year 2003, the company expects to earn $1.34 to $1.39 per share, reflecting a 37% to 42% improvement from 2002. Sales are expected to grow 28% to 33% on an annual basis. Those estimates are based on the expectations for the industry to sell approximately 105 million to 112 million phones, with a 10% decrease in the average selling prices of these phones.

To be sure, some Wall Street analysts worry that the company, which has raised guidance on chip shipments on several occasions, may cause a backlog on inventory. Bears point to the cautious outlook this month of

Samsung

, the world's third-largest phone maker. Samsung is Qualcomm's largest customer for CDMA chipsets for its cell phones.

"We have not been identifying any significant pockets of inventory," said a company executive in response to an analyst's question on a conference call. "We don't see inventory issues. We're spending more of our time chasing shortages."

Also, Qualcomm's results confirm another worrisome trend in the wireless sector. Average selling prices of phones declined 3%, compared with the same period last year. For 2003, the company said it expects the average selling prices for phones to decline about 10% to $188.

Nonetheless, investors liked what they heard Wednesday. Ahead of the report, Qualcomm shares closed the day down 27 cents, or 0.7%, at $36.69. In after-hours activity, shares jumped $1.51, or 4.1%, to $38.15.

"We achieved record revenues and earnings in both our

licensing business and our

semiconductor business, with shipments of approximately 29 million MSM phone chips during the first fiscal quarter," said Qualcomm Chief Executive Irwin Mark Jacobs. "We are continuing to see very strong demand in the Americas and throughout Asia for our industry-leading chipsets and system software."