Qualcomm Rejects Skepticism Over Its Sales Forecast

SAN DIEGO —  Qualcomm Inc. has twice reduced its forecast for 2002 sales of mobile phones based on the company’s chips and patents. It may be time for another cut, investors say.

San Diego-based Qualcomm, the largest maker of chips for Verizon Wireless Inc. phones, expects worldwide sales of as many as 85 million handsets based on the code division multiple access, or CDMA, standard it developed. The company expects U.S. sales of 34 million phones, many with color screens and faster Internet access, to replace old ones.

Chief Executive Irwin Jacobs said that skeptics underestimate the attractiveness of the new phones and that the company’s target may be too low. Investors said the estimates are too high in part because not enough consumers will want the new features. Verizon, the biggest U.S. wireless operator, and Sprint Corp., the fourth-largest, are expected to sell most of the phones, analysts say.

“The jury’s still out, in my opinion, as to whether the carriers do a good job [marketing] and whether the consumers care at this point,” said Rich Crable, a telecommunications analyst at Loomis Sayles & Co., which manages $64 billion and held about 488,000 Qualcomm shares as of March 31.

Qualcomm gets a royalty, which analysts estimate at about 5% on average, from every CDMA phone sold by companies such as its largest customer, Samsung Electronics Co.

Qualcomm’s shares have dropped 39% this year, on pace for the third annual decline, on slower-than-anticipated sales of CDMA phones. They fell 66 cents to $31.01 Friday on Nasdaq. U.S. markets were closed Monday for the Memorial Day holiday.

Investors say 70 million to 75 million phones sold worldwide this year is a more realistic target. Jacobs disagrees.

“We don’t think they’ve fully factored in the impact of the new technology,” he said in an interview last week. In addition, the installation of a CDMA network in India may help Qualcomm meet its estimate, Jacobs said.

In November, the company predicted 2002 CDMA phone sales of 85 million to 95 million. It reduced the forecast in January to 80 million to 90 million units, and in April to 80 million to 85 million.

That represents about one-fifth of other companies’ forecasts for worldwide handset sales of 400 million to 420 million, for all types of mobile phones.

Qualcomm expects 42 million CDMA phones to be sold in the U.S. this year.