Qualcomm quarterly profit jumps 53%

Yukari Iwatani

CHICAGO: Qualcomm Inc. posted a 53 percent increase in fiscal fourth-quarter profit, helped by a tax benefit in its investment unit and strong demand for its wireless chips that allow users to surf the Web at high speeds.

The company, which sells mobile phone chips and licenses wireless technology, also forecast fiscal first-quarter earnings higher than analysts' estimates on anticipated strong demand for phones based on its technology, particularly in India, China and the United States.

Qualcomm owns most of the patents to CDMA, or Code Division Multiple Access, the world's second-most widely used wireless technology standard. CDMA phones are used by more than 164 million subscribers in countries such as the United States, Korea, China, India and Japan. It supplies about 90 percent of the chips for CDMA phones.

The company, which receives royalties based on a percentage of the sale price of every CDMA phone sold, had said in September it was seeing an increase in the average selling price of CDMA phones compared with the previous quarter.

Ed Snyder, principal at independent research firm Charter Research, said Qualcomm was also likely to benefit from strong demand in India where Reliance Infocomm, a unit of the powerful Reliance group, recently started operating a CDMA network.

"The second shoe (in Asia) is dropping now," he said.

San Diego-based Qualcomm reported a net profit of $291 million, or 35 cents a diluted share, for its fiscal fourth quarter ended Sept. 28, compared with $190 million, or 23 cents a share, a year earlier.

TAX RATE DROP

Net profit was significantly higher than its forecast of 19 cents to 21 cents because its tax rate dropped to 6 percent from the usual 30 percent range as a result of losses related to Brazilian investments and operations, the company said.

Excluding investments and amortization of goodwill, the company posted a profit of 29 cents, compared with 31 cents a year ago. Revenue in the quarter was $908.8 million, compared with $873.9 million a year ago. Excluding its strategic investment unit, revenue was $870.4 million.

The company had expected to earn 27 cents to 29 cents a share, excluding investments, on revenue growth of 2 percent to 6 percent.

"The company's gone through a maturation from the establishment of CDMA... to the next stage of growth and making a lot of cash available to shareholders. And that's a good thing," said Chris Bonavico, portfolio manager at Transamerica, which owns shares of Qualcomm.

Other analysts remained concerned about increasing competition from the likes of STMicroelectronics and Texas Instruments Inc. The world's largest cell phone maker, Nokia, which does not use Qualcomm's chips, has also been gaining share in the CDMA market.

Qualcomm said it expects earnings per share, excluding investments, of about 37 cents to 40 cents in the fiscal first quarter as revenue decreases about 1 percent to 6 percent from a year ago and increases 16 percent to 22 percent from the fourth quarter.

For fiscal 2004, Qualcomm expects earnings, excluding investments, of $1.37 to $1.43 a share on revenue growth of 5 percent to 9 percent.

Qualcomm President, Anthony Thornley said fiscal first-quarter revenue would be lower than a year ago because last year's results were fueled by a buildup of cell phones ahead of an anticipated service roll-out in India and a transition to a higher speed network in China.

(Additional reporting by Jessica Hall in Philadelphia)

Reuters