Wall Street Beat: TI, Qualcomm, Handsets Cheer Investors

IDG News Service — Revised forecasts from Qualcomm and Texas Instruments and excitement around the Palm Pre and Apple's iPhone 3GS this week helped raise some hopes for the second half of the year in the wake of a somber report on first-quarter component sales.

Chip developer Qualcomm Thursday increased its sales estimates for the quarter ending in June, saying that operating income, excluding one-time charges, would range from US$1.06 billion to $1.11 billion, up from previous forecasts of $850 million. The company did add a note of caution, though.

"Due to the current economic environment we remain cautious and currently project a modest sequential decrease in chipset shipments," Qualcomm CEO Paul Jacobs said in a press release.

Texas Instruments started off the week by jacking up its second-quarter guidance in a widely watched signal of improved demand for processors. TI said it is now forecasting earnings of $0.14 to $0.22 per share on revenue of $2.3 billion to $2.5 billion, higher than its April earnings-per-share estimate of $0.01 to $0.15 on sales of $1.9 billion to $2.4 billion.

The news from the vendors helped offset continued pessimistic forecasts from ISuppli, which this week estimated that worldwide semiconductor revenue in the first quarter of 2009 was $6.9 billion, down 20.6 percent from $8.6 billion during the first quarter of 2008.

The worldwide chip market this year will decline 15.8 percent from last year, hitting $28.6 billion, it said -- indicating a better second half of the year.

Helping TI's fortunes this week was the Saturday launch of the Palm Pre, which is the first device to use TI's OMAP 3430 processor, designed to integrate several different functions including graphics processing onto a single chip. The Pre launch did not make as big a splash among users as releases of Apple's iPhone. Users did not overwhelm stores but snapped up the Palm devices briskly, leading to a complete drawdown in inventory in some areas. An estimated 50,000 devices sold during the debut weekend.

Palm shares were also boosted this week by continued rumors about its touch-screen Pixie. A research note Thursday by Collins Stewart analyst Ashok Kumar said Palm is working with manufacturer Compal to get the device out by the holiday season this year.

Palm shares closed Thursday at $13.43, up by $1.44.

Meanwhile, Apple is set to launch the 3GS iPhone, unveiled at this week's Worldwide Developer's Conference, next Friday. The excitement about high-end handsets, as well as relatively strong consumer categories such as new TV displays and netbooks, is helping fuel optimism about the rest of the year.

"We are starting to see green shoots within the economy, and I think that bodes well for what we should expect for the second half of 2009," said Shawn Dubravac, economist and director of research of the Consumer Electronics Association.

"We do think that consumer spending, which had been declining, is starting to bottom out or has bottomed out," said Dubravac, speaking on the sidelines at the Consumer Electronics Association's Digital Downtown show in New York Wednesday. "We believe that, as we get closer to 2010, it should be a decent holiday season," Dubravac said.

The tech-heavy Nasdaq, also fueled by a better-than-expected report on U.S. jobless claims and growth in retail sales, rose by 9.29 percent to close at 1862 Thursday.