Qualcomm (Nasdaq: QCOM), developer of wireless technology and chipsets, is primed for delivery of its fiscal first-quarter results after the market closes on Wednesday. Let's see where the bar is set for the company this quarter.

What analysts say:

  • Buy, sell, or waffle? Of the 26 analysts covering Qualcomm, 20 are on record with a buy, five hold the middle ground, and one analyst says "sell." Qualcomm also ranks as a three-star stock (out of five stars) in the Motley Fool CAPS community, based on the views of 987 investors.
  • Revenue. The average analyst wants to see 19% quarterly sales growth, to $2.4 billion.
  • Earnings. The profit bar is set 23% higher this time, to $0.53 per share.

What management says:
Despite its ongoing legal tussle with Broadcom (Nasdaq: BRCM) and Nokia (NYSE: NOK) over license agreements, Qualcomm continues to see strong demand for its products. In late December, Qualcomm boosted its guidance for the coming quarter, citing particular strength in selling low-end chipsets into emerging markets.

Calming concerns that stuffed inventory channels might be behind the growth. CEO Paul Jacobs said, "Even with this continued market growth, we believe the worldwide CDMA inventory channel remains at less than 20 weeks."

What management does:
Of course, seeing more growth in low-end products foretells potentially lower margins for the company. Scrambling around product bans and paying millions each month for a formidable legal team continues to eat at Qualcomm's operating margins, too. And while any lump of cash on the bottom line is good, the dramatic boost in net margin last quarter came from a one-time, $331 million tax benefit.

Margins %

6/06

9/06

12/06

3/07

6/07

9/07

Gross

71.3

71.0

70.5

70.5

70.3

69.8

Operating

38.1

36.0

33.9

33.3

32.7

32.6

Net

33.8

32.8

32.0

32.1

32.5

37.2

Data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Qualcomm continues to expend significant resources keeping its products flowing to carriers Sprint Nextel (NYSE: S), AT&T (NYSE: T), and Verizon Wireless -- a joint venture between Verizon Communications (NYSE: VZ) and Vodafone (NYSE: VOD) -- despite product bans from Broadcom's legal attack. So far it has fared well, but the pain increases as time goes on.

Thankfully, the international wireless market continues to be robust, driving higher chipset sales, even as bans on certain chip sales in the U.S. continue to dog Qualcomm. But knowing its tendency to lowball expectations, Wall Street analysts, on average, expect Qualcomm to perform at and even above the company's own guidance. This high bar leaves little room for error at Qualcomm.

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Fool contributor Dave Mock just can't lie and thus has no hope on the World Poker Tour. He owns shares of Qualcomm and is the author of The Qualcomm Equation. The Fool's disclosure policy sets the record straight on Bigfoot, the Loch Ness monster, and lawn clippings as an aphrodisiac.