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Qualcomm's Earnings Marred By $208 Million Antitrust Fine

The mobile chipmaker reported a $737 million third-quarter profit and raised its revenue forecast for 2009.

Qualcomm has reported third-quarter revenue and earnings that were slightly lower than last year's strong earnings. However, the earnings news was overshadowed by a $208 million antitrust fine leveled against the firm in South Korea.

And, in a sign that the market for smartphones may be picking up, Qualcomm raised its revenue forecast for 2009. Qualcomm said it expects revenue between $10.25 billion and $10.45 billion for the full year -- a substantial gain over the firm's earlier forecasts.

Revenue for the quarter ended June 28 was $2.75 billion, while profit was $737 million. "I'm very pleased with our strong operating performance in this uncertain economic environment," said CEO Paul Jacobs in a conference call.

The earnings report, announced Wednesday, was overshadowed Thursday morning by an announcement from the Korean Fair Trade Commission that it planned to impose a $208 million fine on Qualcomm for what it said were antitrust violations. Qualcomm immediately contested the charges.

Qualcomm has long held a dominant position in the South Korean market and it supplies leading handset manufacturers Samsung and LG Electronics with sophisticated chips. "When licensing its CDMA mobile technology, Qualcomm levied higher royalties on companies that used modem chips supplied by rival companies," the Korean regulatory agency said, according to Korean media reports.

Qualcomm challenged the antitrust decision and complained there was no indication how the $208 million figure was calculated. Qualcomm indicated it will likely appeal the antitrust ruling.

"The decision," said Qualcomm's Donald Rosenberg in a statement, "appears to have ignored or discounted evidence presented by Qualcomm and its Korean customers that demonstrates that Qualcomm's business practices in Korea have been lawful, highly beneficial to its customers and the Korean wireless industry, and pro-competitive." Rosenberg is Qualcomm's executive VP, general counsel, and corporate secretary.

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