Asian Markets Lift Qualcomm Results

Spurred by growing demand in China and India for its wireless technology, Qualcomm Inc. said Wednesday that sales rose 20% and earnings reached $192 million for its fiscal third quarter.

The San Diego developer of code division multiple access, or CDMA, technology reported net income of 23 cents a share for its three-month period ended June 29. It lost $13.8 million, or 2 cents a share, in its third quarter last year. Sales rose to $922 million from $771 million.

“We are pleased with our performance year over year,” Qualcomm Chairman Irwin Jacobs said in a conference call.

Excluding its Qualcomm Strategic Initiatives investment arm, the company earned 33 cents a share, a penny off the 34 cents expected by analysts, according to Thomson First Call.

For the fiscal fourth quarter, Qualcomm said it expects to earn 27 cents to 29 cents excluding QSI, down from 31 cents in last year’s final quarter. Analysts had expected earnings of 29 cents.

The company’s shares sank to $35.70 in extended trading after the results were released. They gained 1 cent to $36.25 in regular Nasdaq trading.

Qualcomm is benefiting from a wave of wireless-phone handset upgrades among consumers who want to take advantage of new features such as e-mail, said Jack Gold, an analyst at META Group in Westboro, Mass.

CDMA technology has captured 48% of the U.S. market, where it is used mainly by Verizon Wireless, the nation’s largest cell phone carrier, and Sprint PCS. Licensing and royalty fees from equipment and handset makers constitute 24% of Qualcomm’s revenue.

Worldwide, CDMA accounts for 20% of the market; the dominant technology is known as global system for mobile communications, or GSM. Qualcomm is hoping its moves into China, India, Japan and South Korea, as well as decisions by some GSM handset makers to produce CDMA units, will help the company expand globally.

“The issue in the longer term is whether Qualcomm can stay in a game where 80% of the world is on GSM,” Gold said. “I honestly do think they can, but it won’t be a smooth ride for them.”

Analysts such as Tal Liani at Merrill Lynch figure Qualcomm should do well for the next year as the sole licensor of CDMA technology. But other companies , including Nokia, are developing their own versions of CDMA chips and will begin to challenge Qualcomm’s biggest source of revenue -- chipset sales -- by late next year or in 2005, analysts said.

Jacobs and other executives acknowledged that falling prices and competition will begin to eat into Qualcomm’s market share.