Investors probably should start believing what Qualcomm says, because it likes to make good on its promises.

A year ago, Qualcomm was fighting a public relations battle that said a move to wideband CDMA (WCDMA) third-generation technology was a move away from Qualcomm.

Qualcomm makes much of its money from royalties associated with today's Interim Standard-95 technology and will from tomorrow's cdma2000 networks. But investors had difficulty believing Qualcomm held an equal number of patents for new WCDMA technology, which is incompatible with today's CDMA and cdma2000 standards.

Because about 60% of the world's carriers operate GSM networks and plan to migrate to WCDMA technology in the next few years, Qualcomm's royalty stream was in question. Many investors doubted whether Qualcomm would continue to receive the estimated 4.5% to 5% in royalties it enjoys from today's CDMA world.

Meanwhile, Qualcomm defended its patent position, claiming it would receive the same royalty rates from WCDMA as it receives today. During the last year, the CDMA royalty and chip company signed extension deals with Ericsson, Lucent Technologies, Nortel Networks, Motorola and a slew of Japanese firms.

Nokia was the main holdout until Qualcomm struck gold earlier this month. It signed a deal with Nokia that expands their existing CDMA subscriber cross-licensing agreement to include all versions of CDMA for the same royalties Qualcomm gets today from CDMA.

Analysts say the deal solidifies Qualcomm's ability to receive WCDMA royalty revenues going forward. Qualcomm holds more than 400 patents for CDMA, with another 900 patent applications pending.

“That was always the question,” said Peter Friedland, senior analyst with WR Hambrecht, who rates Qualcomm's stock a “buy.” “With the biggest handset manufacturer in the world saying they are going to pay the same royalty rates, it really shows that everything Qualcomm has been saying is true.”

Today, Qualcomm's royalties account for about 20% of global handset shipments and 11% of the worldwide wireless subscriber base, according to Merrill Lynch. In the future, Qualcomm could generate royalties on almost all mobile phones shipped.

“The company is sitting quite good,” said Mark Roberts, managing director of the wireless equipment practice for First Union Securities, who reiterated a “strong buy” on Qualcomm's stock. “Qualcomm is increasingly being viewed as the bell weather for the group. The reason is because at this point, the controversy is out of the stock.”

Still, some investors are maintaining a wait-and-see attitude when it comes to Qualcomm. They've been burned before. UBS PaineWebber analyst Walter Piecyk initiated coverage of the company in December 1999 at a price target of $1000 per share. He said 85% of phones sold by 2010 would use CDMA technology, resulting in $20 billion in revenues. Investors loved it, and shares of Qualcomm's stock soared 30%. Qualcomm's stock split four for one, but the party didn't last long.

This year, SG Cowen analyst Scott Searle is going out on a limb. This month's licensing agreement with Nokia prompted Searle to upgrade Qualcomm stock to a “strong buy” from a “buy” rating and place an 18-month price target of $114 on the company's stock. Searle noted that he risked being early in this prediction but believes the long-term opportunity outweighs some of the nearer-term concerns.

But Qualcomm may not realize those valuable royalties from WCDMA any time soon if the technology is delayed. Many analysts don't see commercially viable WCDMA systems until 2003 or later.

“I've always believed WCDMA would be somewhat delayed because of testing issues, rolling it out in a new frequency band and the revolutionary nature of the equipment,” Qualcomm CEO and Chairman Irwin Jacobs recently told Telephony.

Qualcomm has focused most of its efforts on migrating CDMA to cdma2000 technology, for which it will receive royalties sooner. Korean operators already have launched the service, while U.S. carriers Verizon Communications and Sprint PCS are expected to deploy cdma2000 systems in the fourth quarter. It remains to be seen how fast cdma2000 carriers will ramp up subscribers.