"Uncertainty about the legal disputes has weighed on Qualcomm (NASDAQ: QCOM)," says Richard Moroney, who rates the stock a long-term buy.

The editor of Dow Theory Forecasts explains, "Though the court case may distract investors, Qualcomm’s long-term fundamentals appear solid." Here's his bullish outlook.

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"The company is embroiled in disputes over royalty fees paid for use of its patents, particularly by one of its largest customers, Nokia. In March, the combatants agreed to consolidate a host of lawsuits into one case to be heard later this year and likely to be decided by year’s end.

"Barring a disastrous court loss, which seems unlikely, Qualcomm shares should benefit. Any resolution will reduce uncertainty. By the end of this year, Qualcomm should be able to jettison some of the baggage holding back its stock.

"While the U.S. economic slowdown has sparked fears of a decline in demand for microchips, Qualcomm should benefit as cell-phone users worldwide transition to third-generation technology, which allows for faster downloading of video, music and other data.

"Qualcomm sells its microchips for use in mobile phones and wireless infrastructure around the globe. Demand for higher-functioning cell phones remains strong, as subscribers upgrade phones and carriers increase sales of third-generation products.

"While customers adopt third-generation wireless technology, Qualcomm is already preparing a portfolio of fourth-generation technology slated for release from 2011 to 2015.

"Meanwhile, through the distractions, Qualcomm has continued to post solid earnings growth. Per-share earnings excluding special items and stock-based compensation rose 23% in fiscal 2007 ended September and 14% in the six months ended March.

"Consensus estimates project growth in per-share earnings of 5% in fiscal 2008 ending September and 14% in fiscal 2009. Costs have risen sharply in recent quarters, but the company still seems capable of topping Wall Street’s expectations.

"Qualcomm shares have risen 11% this year, compared to a 5% decline in the S&P 500 Index. At 20 times the per-share earnings of $2.21 expected over the next year, Qualcomm trades below its five-year average forward P/E ratio of 24."