Cell phone chip supplier Qualcomm Inc flipped to a loss for its fiscal second quarter, hurt by investment losses and hefty costs related to its legal settlement with archrival Broadcom Corp .

But its shares rose 3 percent in early trading as investors were relieved that the long-standing legal battle was finally over, Qualcomm's revenue beat estimates, and it raised its full-year revenue target as it saw signs of improvement in the market for advanced phones.

Qualcomm reported results after announcing a settlement late Sunday night in which it will pay $891 million to Broadcom over four years to end their technology patent infringement battle that dates back to May 2005.

Qualcomm posted a net loss of $289 million, or 18 cents per share for its fiscal second quarter, ended March 29, compared with a profit of $766 million, or 47 cents per share, in the same quarter a year earlier.

Excluding items, its loss would have been 3 cents per share compared with analyst expectations for a profit of 40 cents per share, according to Reuters Estimates.

Revenue fell to $2.46 billion from $2.6 billion in the year-earlier quarter, but were ahead of average analyst expectations for $2.35 billion, according to Reuters Estimates.

The company said global demand for advanced phones remained strong despite the weak economy. Collins Stewart analyst Ashok Kumar said the strength was likely because of strong growth in China, where high-speed wireless networks are being built.

Qualcomm raised its revenue target for its fiscal year 2009 to a range of $9.85 billion to $10.25 billion from its earlier estimate for revenue of $9.3 billion to $9.8 billion.

Chief Executive Paul Jacobs said in a statement that while the business environment remains uncertain, he believes the market for its CDMA mobile phone technology had stabilized.

He also said that the company is seeing some replenishment of products driven primarily by emerging markets.

Qualcomm's rival Texas Instruments had said last week that it saw business improve in some segments but was still cautious about the economic climate.

Collins Stewart's Kumar said investors were focused on the end of the legal battle. In particular he said it was good news that Qualcomm can still charge Broadcom's handset customers licensing fees even though it agreed not to charge Broadcom.

It does not change Qualcomm's licensing models. That's important, Kumar said.

Qualcomm shares rose more than 3 percent to $42.75 in early trade after closing at $41.36 in regular Nasdaq trade on Friday.

(Reporting by Sinead Carew; Editing by Derek Caney and Brian Moss)