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Qualcomm warns of slowing sales

The wireless-technology provider matches analyst expectations but lowers its revenue forecast for the upcoming quarters.

By Ben Charny Qualcomm on Wednesday reported second-quarter earnings of 29 cents per share, matching analyst expectations, but lowered its revenue forecast for upcoming quarters and the year.

Net earnings for the period were $232.64 million on revenues of $713 million. That compares with earnings of $206.82 million, or 26 cents per share, on sales of $648.8 million in the same period a year earlier.

A consensus of analysts surveyed by First Call expected earnings of 29 cents a share.

But showing it isn't immune from the slowdown that has crippled much of the telephone industry, Qualcomm CEO Irwin Jacobs lowered revenue forecasts for the next quarter and the year, and also said he expected the number of handset sales for the year to drop.

"We are all going through a bit of a dip here," Jacobs said.

The wireless technology provider guided Wall Street down for coming quarters, saying it expects earnings for the year to be $1.05 per share. Wall Street had earlier projected yearly earnings of $1.26 cents per share.

Qualcomm expects there will be 80 million phones containing its software sold in 2001, down 10 million from previous forecasts. Jacobs said handsets sales will be particularly down in Korea and the United States.

The company also expects a 20 percent decrease in the price for these phones, which could trim its revenue because of the royalties it receives for each phone sold.

Qualcomm also slightly downgraded the number of integrated circuits it expected for the upcoming quarter, down to approximately 14 million, compared with 16 million in the same period a year ago. The company estimated its third-quarter earnings would be 21 cents per share.

Investors started pounding the stock in after-hours trading. Qualcomm shares slid $10.98 to as low as $52, before rebounding.

Qualcomm also lowered its revenue forecasts for the third quarter. It had earlier projected a gain of 32 cents per share. Instead, it expects a gain of 21 cents per share.

The company earns most of its revenues by licensing technologies it invented. Its most popular product is CDMA, software that helps run tens of millions of cell phones throughout the world.

Analysts had expected nearly every division of the company to post positive numbers, including the chipmaking section, which they thought would report a 25 percent gain from a year earlier.

The company in January predicted it would sell about 16 million of its chips during the second quarter, up from about 11 million in the same period a year ago.

Wall Street was already reacting to Qualcomm's earnings, even before the results were in. Lehman Brothers analyst Timothy Luke upgraded his assessment of the stock, making it a "strong buy." He also predicted that the stock's price will double within the year, peaking at $120 per share.

The in-line results came despite several hiccups Qualcomm suffered in the past three months. One was a well-documented delay in getting chips from one particular supplier Qualcomm has yet to name. Qualcomm had expected to resolve the situation by the end of the third quarter this year.

IBM, Motorola, and Texas Instruments are among the manufacturers that make Qualcomm's chips.

Qualcomm is in the midst of unresolved negotiations with Nokia, which dominates the world's handset market. Nokia is deciding whether to license Qualcomm's equipment to use in its future generations of cell phones.