July 22, 2010 / 12:11 AM / 9 years ago

UPDATE 3-Qualcomm profit, revenue beat forecasts

* Q3 proforma share $0.57 vs analysts view $0.54

* Q3 revenue $2.71 bln vs Wall Street view $2.63 bln

* Sales helped by Google Android phones

* Eyes alternatives for Flo TV

* Qualcomm shares rise 4.8 pct after hours (Adds company and analyst comments, byline, updates share price)

By Sinead Carew

NEW YORK, July 21 (Reuters) - Cellphone chip supplier Qualcomm Inc’s (QCOM.O) fiscal third-quarter earnings and revenue beat Wall Street estimates on strong smartphone demand, sending its shares up 4.8 percent after hours.

In particular, sales of phones based on Android software from Google Inc (GOOG.O) helped boost Qualcomm’s sales as these devices need more complicated, expensive chips.

Qualcomm said it was looking for alternatives for its mobile video network, which has been a disappointment for the company. But investors focused on its strong profit and revenue.

“It was a really good quarter,” said Pacific Crest analyst James Faucette. “Demand is picking up a little bit, especially in the smartphone segment. Qualcomm’s tied to Android, so as Android phone sales increase it’s good for Qualcomm.”

Qualcomm cited devices like Droid Incredible from HTC Corp (2498.TW) and phones from Sony Ericsson, a Sony Corp (6758.T) and Ericsson ERIAF.PK venture. U.S. wireless provider Verizon Wireless, a venture of Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L), sells Incredible.

Earnings rose to $767 million, or 47 cents per share, for the quarter ended June 27, from $737 million, or 44 cents per share, a year ago.

Excluding unusual items and its investment arm, Qualcomm earned 57 cents per share, above analysts’ average expectation for 54 cents, according to Thomson Reuters I/B/E/S.

Revenue fell to $2.71 billion from $2.75 billion over the same period, but beat analysts’ expectations for $2.63 billion.

Chief Financial Officer Bill Keitel told Reuters in an interview that smartphone demand was strong enough in markets such as China and the United States that it more than offset earnings pressure related to weakness of the euro against the U.S. dollar.

“We’re selling a bit more of our more capable chipsets so that’s had a favorable impact,” Keitel said. “China and the US are growing pretty strongly for more capable devices.”

Qualcomm shares rose 4.8 percent to $37.9 in extended trading after the news, after closing down 1.61 percent at $36.16 in regular Nasdaq trade.

Faucette said the share rise was likely partly a relief rally as Qualcomm shares have fallen more than 12 percent since April on concerns about weaker growth prospects.

The San Diego-based chip and technology license supplier said it was in talks with a number of potential partners and would consider “any alternatives” for its Flo TV business, a mobile video broadcast network it built to boost demand for advanced chips.

Alternatives could include a sale of the entire operation or the related airwaves licenses, according to Qualcomm, which recently said that Flo TV demand was a disappointment as too few consumers were willing to pay monthly fees for the service.

Chief Executive Paul Jacobs told analysts on a conference call that Qualcomm aims within a year to have an alternative for Flo TV, in which it has invested at least $800 million to establish. It has not disclosed financial results from the venture.

“There’s definitely some assets there. It’s a question of what the price is they’re going to get,” said FBN analyst Michael Burton.

Burton said the best hope for Flo TV would be if a new owner found a way to offer the service free to consumers. He cited Asia as an example of mobile TV working when it was free.

Qualcomm estimated earnings per share, excluding unusual items, for the current quarter of 55 cents to 59 cents on revenue of $2.67 billion to $2.93 billion compared with analysts’ expectations for earnings of 57 cents per share on revenue of $2.767 billion

Keitel said he expects smartphone demand to continue to increase for the rest of the calendar year, building up to a strong fourth quarter holiday season.

“For this calendar year we are optimistic about a continued increase in the rate of new (advanced) phones sold worldwide,” Keitel said. (Reporting by Sinead Carew; Editing by Richard Chang)

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