Qualcomm Inc (QCOM)

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UPDATE 2-Qualcomm sees supply shortages into first quarter
Thu Oct 21, 2004 03:15 PM ET
By Sinead Carew

http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=6573925

NEW YORK, Oct 21 (Reuters) - A supply shortage for some mobile phone chips at Qualcomm Inc. (QCOM.O: Quote, Profile, Research) could stretch into the first quarter of next year as demand continues to rise, the company's chief financial officer said on Thursday.

Qualcomm, which has had problems meeting demand for some mobile phone chips this year, said in July that production capacity constraints were expected to be resolved by year-end.

CFO William Keitel said Qualcomm has resolved most of its supply issues, but is still producing some chips used for transmitting and receiving calls to mobile phones too slowly.

"We'll have it resolved by the end of the first calendar quarter," Keitel said in an interview with Reuters. "Our window on when we expect to be back in balance has been moving out because demand has continued to increase."

Deutsche Bank analyst Brian Modoff said rising demand was good news for Qualcomm, whose shares rose 1.6 percent to $44.08 in afternoon trade on Nasdaq.

"The only question is do their continued supply shortages cause customers to look elsewhere," said Modoff. "I don't think another quarter is a big deal but they've got to resolve it."

Keitel said the shortage relates to radio chips in Qualcomm's 6000 series product range but did not name specific products. Modoff said he thinks Qualcomm is short on some chips for CDMA, a mobile standard used mainly in the United States and Asia.

Qualcomm has long dominated the market for CDMA, but Modoff said he believes rival Texas Instruments (TXN.N: Quote, Profile, Research) has products that compete with the Qualcomm chips in question.

Keitel noted that Qualcomm has already asked companies that manufacture its chips for a "significant" increase in production capacity this year.

"We've been successful in that effort and we're having to go back to them for more capacity," he said. Qualcomm plans to announce its outlook for 2005 when it reports its fiscal fourth quarter earnings in November.

Keitel said the company is "planning to have extra capacity available should demand grow higher" than estimates.