Qualcomm's Lackluster Reception

San Diego-based wireless superstar Qualcomm (Nasdaq: QCOM) reported fiscal first quarter earnings after the close yesterday, handily trouncing its conservative November guidance and even surpassing its upgraded December prognostication. The company earned $419 million on $1.2 billion in revenue, growing 21% and 13%, respectively, year over year (not including effects of its strategic investment segment, QSI).

Beating earnings-per-share consensus of $0.48 by $0.03 would normally bounce a stock higher, except that Qualcomm's stock has already appreciated 30% in the last few months. So, like a surprise birthday party that was leaked in advance, Qualcomm's big surprise was greeted with half-hearted hoorays -- investors got their present early.

Even a positive outlook on CDMA sales didn't ignite much enthusiasm. Unimpressive reports from Motorola (NYSE: MOT) and RF Micro Devices (Nasdaq: RFMD) and their mixed outlook -- while not a direct reflection of Qualcomm's performance -- helped dampen the mood this week.

From an operations standpoint, Qualcomm continues an impressive streak. Free cash flow hit nearly $400 million, pushing cash and equivalents up to $5.9 billion. As predicted in December, the company sold roughly 32 million CDMA chips, surpassing earlier expectations of 27 million-28 million. Santa was very kind to Qualcomm this year.

Another exciting tidbit that seemed to generate less hubbub than it should have was that royalties from WCDMA products made up 12% of Qualcomm's total royalty income. This new technology segment promises a big future for Qualcomm, and thanks largely to subscriber growth in DoCoMo's 3G network in Japan, the company is starting to see fruit after years of delay.

Total revenue in Qualcomm's licensing and royalty segment saw a big jump as well, growing 46% sequentially and 38% year over year to $353 million. A decent chunk of this increase likely came from one notable source: Nokia (NYSE: NOK). The world's top handset producer is making substantial penetration in CDMA lately and should shed light on its CDMA sales (for which it pays Qualcomm a royalty) during its Q4 report today.

Yet, even after nearly doubling its growth expectations for FY 2004 and lauding Verizon Wireless' (NYSE: VZ) expansion of their EV-DO technology, many industry watchers still chose to focus on projected seasonal weakness in the next quarter. Feeling shunned again, investors and Qualcomm fans are still looking for the kind of love that flowed freely in 1999.

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Dave Mock owns shares of Motorola. He is co-author of Tapping into Wireless and can be reached at dave@davemock.com. The Motley Fool is investors writing for investors.