Qualcomm raises financial guidance, while lawyers wrestle

Qualcomm Inc. can chew gum while swatting at nemeses who hover over its business model, if yesterday’s financial results are any indication. But the chip vendor acknowledged that it had won and lost in various legal matters during the quarter.
For its fiscal third-quarter results, the San Diego-based chip vendor posted $2.33 billion in revenue, up 19% over the year-ago quarter, and $798 million in net income, up 24% over the year-ago quarter. Qualcomm’s shares ticked up slightly this morning, in the wake of its earnings report, in which it raised its guidance for its entire fiscal year, ending Sept. 30.
The chip vendor said that global demand for 3G devices and services enabled it to ship 65 million CDMA chipsets in both CDMA2000 1x EV-DO and W-CDMA technologies during the quarter.
All this while rival Broadcom Corp. succeeded last week in signing a licensing deal with Verizon Wireless to allow the network operator to circumvent a government ban on new 3G handsets containing select Qualcomm chips.
Chip analyst Will Strauss at Forward Concepts said that Verizon Wireless’ deal with Broadcom would undercut Qualcomm’s and its allies’ arguments that the ban is damaging to the economy, the public interest, public safety and even national security. Strauss predicted that other carriers, including Sprint Nextel Corp. and AT&T Inc., might well strike their own deals to avoid the legal cloud that hangs over the sale of new 3G handsets in the critical fourth quarter beginning in October.
Meanwhile, a window is closing on Aug. 6 for a presidential veto of the U.S. International Trade Commission’s June decision to ban new models of 3G handsets containing Qualcomm chips. The ITC ruled that the chips infringe on a Broadcom patent. When the veto window closes, a federal appeals court will consider the merits of Qualcomm’s appeal of the ITC’s infringement ruling and, conceivably, could reverse the ban.
Also, a long-running dispute with Nokia Corp. over a cross-licensing agreement continued to fester. Qualcomm CEO Paul Jacobs said that the absence of anticipated royalties from Nokia, the world’s largest handset vendor, would weigh on its earnings-as much as five cents per share-in the fourth fiscal quarter now underway. Other legal actions-generally, complaints against Qualcomm’s licensing practices by rivals and partners-are about to be heard in court.
“While we continue to execute well . we are also expending a great amount of time and resources defending our business model,” said Jacobs. “In the most recent quarter, we have made progress in some of these battles, while losing ground in others.
“While we are increasing our guidance for the year, ITC and litigation outcomes are uncertain and could have a material impact on our business and results of operations.”