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Buoyant Qualcomm proves R&D pays

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Qualcomm turned in profits of $352 million on turnover of $1.2 billion in the last quarter, citing higher than expected demand for its CDMA phone chipsets. Profits are up 13 per cent year on year, despite Qualcomm increasing R&D investment by a third.

Qualcomm produces CDMA chipsets for the US and Korean markets, and WCDMA 3G for the rest of the world. But Qualcomm also gets a revenue slice from rival WCDMA manufacturers, and licensing revenue was up $111 million, or 38 per cent, year on year. Qualcomm licensees sold 31 million handsets in the past quarter.

Contrary to some expectations, the arrival of real competition for its CDMA business from Nokia/Texas Instruments has seen the market boom and driven margins higher: Qualcomm cited "higher than expected average selling prices" in its press release.

In the SEC filing, Qualcomm says it doesn't expect this trend to last. It reckons 138-146 million CDMA phones to ship this year, and while the average selling price remained constant last year, it expects a seven per cent drop in 2004.

With a warchest of $1.7 billion in cash and $2 billion stock, Qualcomm has enviable resources to fuel further R&D investment. ®

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