SAN DIEGO-Qualcomm Inc. raised its revenue estimates for its third quarter ending in June, indicating it expects revenue at or slightly above earlier forecasts of $1.77 billion to $1.87 billion based on strong demand for its chipsets destined for both low-end and 3G phones.
The San Diego-based firm based its revised revenue estimates on expected shipments of 53 million to 56 million baseband chips, compared with about 36 million in the year-ago quarter and 49 million in the prior quarter.
Qualcomm’s improved guidance reflects stronger-than-anticipated orders for low-end chipsets in India and China and strengthened demand for CDMA2000 EV-DO chipsets in the United States and South Korea, according to the investment banking firm CIBC World Markets, which raised its target price for Qualcomm’s stock to $60 from $56.
According to investment banking firm UBS Warburg, factors that could affect Qualcomm’s estimates include competition in W-CDMA chipsets from L.M. Ericsson, Freescale Semiconductor Inc. and Nokia Corp./Texas Instruments Inc. Qualcomm’s failure to achieve W-CDMA market share against these competitors could hurt earnings, as could an erosion of related royalty revenues due to W-CDMA competition. A slowdown in handset demand could also stem Qualcomm’s earnings growth, UBS said.
Whether U.S. consumers jump on 3G services and the more expensive handsets required to access them, Qualcomm still benefits from network operators’ demand for 3G chipsets in their new phones, according to a Yankee Group analysis.
Qualcomm also reported that patents issued to its Flarion Technologies Inc. subsidiary triggered the payment of $205 million to former stockholders and option holders of Flarion. Qualcomm acquired the firm January.
The chip maker also announced a partnership with Microsoft Corp. and updated its timeframe on the rollout of chipsets.
Qualcomm and Microsoft jointly announced a collaboration to enable the porting of the Microsoft Windows Mobile operating system to Qualcomm’s chipsets. The companies’ collaboration is intended to shorten time to market for vendors of smart phones, which typically retail for six to 12 months before being superseded by more advanced models. The chips should be available next year, according to a Microsoft executive.
Qualcomm added that it plans to sample three of its UMTS chipsets to handset vendors in May, earlier than originally scheduled. The company said the accelerated schedule should help speed handset vendors’ delivery of 3G devices.
