Tuesday, March 07, 2006

Slick Phones Raising Qualcomm's Outlook

Investor's Business Daily reports that Qualcomm "now expects sales of $1.75 billion to $1.82 billion for the period ending March 26, its second fiscal quarter. The midpoint would be 30% more than the year-ago quarter. Qualcomm's earlier guidance called for sales of $1.63 billion to $1.73 billion." Qualcoom is riding the wave of two trends: consumer uptake of 3G handsets as well as a growing number of customers in developing countries buying their first cell phone.

Mike Walkley at Piper Jaffray said, "Qualcomm has the best profit potential in wireless. Profit margins could expand this year, given the revenue growth in 3G and their licensing business."

According to the article, Qualcomm "now expects to sell 47 million cell phone chips this quarter vs. its earlier estimate of 45 million." The company pointed to "strong growth in 3G chip shipments." It is estimated that "about 5 million U.S. consumers have 3G phones and "only about 2 million of those are connected to a 3G data and voice service, while the rest connect to a regular voice service."

Walkley noted "most of the cool new phones are 3G-capable, even if people don't necessarily use the service. Verizon's version of the sleek Motorola (MOT) Razr phone is 3G capable. Sprint's top-selling phone, the Samsung A900, is also 3G capable." He said, "Even if people don't want to pay for 3G service, they want the cool phones,. Those just happen to be 3G."

More 3G handset "are being sold in Europe and Asia," and Walkley commented that "Samsung and LG Electronics, two large Qualcomm customers, have done well with 3G handsets in those markets."

In addition to 3G, "many first-time buyers in nations such as India are also boosting Qualcomm's results." According to the article, "India has 18 million cell phone customers using Qualcomm technology, and Walkley said "it's adding 1 million more per month."