Qualcomm Lowers Its FY 2008 Forecast – But The Reason Should Be Noted


Qualcomm (QCOM), the huge San Diego, CA based manufacturer and licenser of cell phone chips and patents, reported a solid fiscal year 4th quarter after the close yesterday (FY 4Q Earnings Release), but forecasted weak profit growth in the coming fiscal year of 1%-4%.

Qualcomm’s shares are down more than 4% to around $38. 

Unlike Cisco, however, this isn’t due to weak IT spending environment but a company specific issue having to do with litigation with Nokia over royalty payments to Qualcomm:

We are engaged in multiple disputes with Nokia Corp., including arbitration over Nokia’s obligation to pay royalties for the use of certain of our patents…. We have excluded from our fiscal 2008 revenue and earnings guidance our estimate of royalties which we believe Nokia is required to report and pay to us under our existing license agreement in fiscal 2008 of approximately $0.25-$0.30 diluted earnings per share.

This news, along with some other, has sent markets down especially tech and the Nasdaq. 

But it doesn’t seem that this forecast has as much bad implications for other tech companies as Cisco’s.  So this could all be a little overdone this morning.

Qualcomm shares look cheap here at around 17 times this just completed year’s Net Income/Free Cash Flow – after you back out the cash and investments on their balance sheet.

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