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Qualcomm beats expectations, comfortable with outlook

Wireless giant Qualcomm (Nasdaq: QCOM) topped estimates Tuesday with pro forma fiscal second quarter earnings of 26 cents a share and said it was comfortable with projections for the current quarter.

First Call was expecting earnings of 24 cents a share.

Qualcomm's financial picture was complicated this quarter because it sold off its handset unit and recorded a host of one-time items. Qualcomm refocused its business on its code-division multiple access (CDMA) technology.

In fact, the most concrete thing about Qualcomm's quarter was the outlook. The company said it expects shipments of its MSM chip to top first quarter shipments of 14.5 million. The Company expects its pro forma earnings per share to meet First Call estimates calling for a profit of 27 cents a share.

On a pro forma basis, which excludes a host of one-time items, Qualcomm reported sales of $649 million and earnings of 26 cents a share. Net income was $207 million in the second quarter.

The pro forma results exclude acquisition-related costs. Charges include a $60 million one-time write-off of purchased in-process technology and $21 million in ongoing amortization of goodwill and other intangible assets, $50 million in losses incurred by the exited consumer phone business and $56 million in charges related to the sale, $12 million in employer payroll taxes on employee non-qualified stock option exercises, $267 million in realized gains from sale of marketable securities and $3 million in other non-operating charges. Pro forma results also exclude results from the businesses Qualcomm exited.

On a reported basis, Qualcomm reported earnings of 25 cents a share on sales of $728 million.

In either case, Qualcomm's sales were a bit light compared to analyst projections. "As expected, second quarter revenues reflected lower shipments in our chip business," said CEO Irwin M. Jacobs, in a statement. "However, we believe industry inventories have returned to normal levels and we expect a strong second half with record MSM (Mobile Station Modem) chip shipments."

In the quarter, Qualcomm sold its phone business to Kyocera and settled a lengthy patent lawsuit with Motorola (NYSE: MOT). Qualcomm also acquired SnapTrack, a leader in wireless position location technology; the technology development group of Tellit, a U.K.-based company with industry-leading expertise in European Radio Frequency (RF) handset design; and Within Technology, a technology and systems consulting firm.

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• Qualcomm stumbles on outlook, buys SnapTrack>