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Eager for any scrap of good news on the wireless front, investors boosted shares of

Qualcomm

(QCOM) - Get Free Report

today when the company dispensed a relatively cheery earnings forecast for this quarter. But some analysts shrugged off the news, saying the company will nevertheless have a tough time meeting what looks like over-ambitious guidance for the second half of the year and 2003.

This morning Qualcomm announced that earnings for its June quarter would be at the

high end of earlier forecasts, propelled by increasing demand for CDMA products around the world. But the Street wasn't buying it: In a reflection of growing skepticism on the wireless market, Qualcomm was included among a raft of wireless stocks downgraded by Banc of America this morning.

Still, rather than declining on the downgrade, most of the stocks on Banc of America's downgrade list were slightly up, apparently lifted by Qualcomm's relatively upbeat news. In midafternoon trading Qualcomm clung to an incremental gain of 0.9%, trading up 23 cents to $26.56.

Motorola

(MOT)

was up 0.5% to $14.85, and

RF Micro Devices

(RFMD)

was up 7.2% to $7.04.

Anaren Microwave

(ANEN)

was off 1.9% to $8.43, and

Ericcsson

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was down 3.0% to $1.60.

Banc of America has done investment banking for Anaren and Motorola.

In a research note accompanying the downgrade, analyst Mark McKechnie cited worries that cash-poor U.S. wireless operators may start slashing subsidies on handsets, a move that would further depress demand for phones. That's already happened in Europe. He reduced his rating on Qualcomm from buy to market perform based on "the potential risk of subsidy reductions spreading to the U.S. market," adding that he's become "less comfortable with our CY03 earnings estimate."

In response to Qualcomm's announcement about the current quarter, Deutsche Bank analyst Brian Modoff also released a note casting doubt on the company's ability to make future earnings estimates. While saying that he fully expects QCOM to make numbers for June, he added that it will likely find it impossible to meet guidance for the rest of 2002 and 2003, given "near universal weakness" in wireless demand. Deutsche Bank has done investment banking for Qualcomm.

The wireless market is nearly saturated in developed markets, he noted, while other regions of the world are struggling too: Latin America "has apparently fallen off the map with an economic crisis that is stifling the region across the board,

while developed Asia, perhaps the bastion of the CDMA world, is not growing at historic levels." Even China is struggling to add CDMA subscribers; though operator China Unicom had set a target of 7 million new subscribers for 2002; Modoff estimates that 2 million is more likely.

Notwithstanding Qualcomm's reassurance on the current quarter, the jaded mood reflects recent evidence of a bleak demand outlook for wireless. Yesterday wireless handset maker

Nokia

(NOK) - Get Free Report

ratcheted down sales expectations for the second half to 10% growth, from 15%, after warning earlier that it would miss second-quarter sales guidance.

And just last week,

Sprint PCS

(PCS)

triggered a

nasty wireless selloff when it said it would sign up only half as many subscribers as it had anticipated in the second quarter. Sprint PCS is among the three biggest CDMA operators.

For the wireless industry to pick up, speculates Deutsche Bank analyst Modoff, one of two depressing events has to take place: consolidation (both within the carrier group and among the major OEMs and cell-chip vendors) or bankruptcies. Until that happens, he writes, "we do not expect a return to top-line growth and meaningful/consistent profitability (without all of those special 'one-time' charges)."