Average:  (Noun) 2 a : an estimation of or approximation to an arithmetic mean b : a level (as of intelligence) typical of a group, class, or series  – Webster

Qualcomm, Inc. (NASDAQ: QCOM) is supposed to be the premier worldwide provider of chips for smartphones. However, the market thinks the stock – and the company’s management are a disappointment.

In the company’s fiscal quarter, which ended March 28, Qualcomm posted a very modest revenue improvement, from $2.46 billion last year to $2.66 billion in the most recent period. Net income was $774 million compared with a net loss of $289 million. But, the second quarter of fiscal 2009 reflected a $748 million litigation settlement charge related to a patent agreement with Broadcom Corporation (NASDAQ: BRCM).The market sold off the stock after Qualcomm issued a disappointing forecast for the current quarter. The company said revenue would be between $2.5 billion and $2.7 billion. That is a decrease of 2% to 9%. The EPS forecast was for $.40 to $.44. That would be flat to down 9%. The company mixes its quarterly numbers with pro forma results, which give shareholders a distorted view of the firm’s position.

Wall Street has pushed Qualcomm shares down 22% over the last year while its competitors, Texas Instruments (NYSE: TXN) and Broadcom are up 25% to 30%.

The global cellphone market is expected to grow by over 10% in 2010, and smart phone sales are expected to grow more quickly.  With that in mind, Qualcomm should be having its best results in years.

Qualcomm has an unusually strong patent pool, but it has managed it badly: getting into legal fights with Broadcom and Nokia oy (NYSE: NOK), its largest customer. Neither action worked out well for Qualcomm. The company would have certainly been better off at the negotiating table than in front of a series of judges.

Jacobs is the son of the founder Dr. Irwin Mark Jacobs.  He needs to be disinherited.

Douglas A. McIntyre

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