Qualcomm Inc said it will ship fewer cellphone chips than expected this quarter because its customers are shaving product inventories, sending its shares down almost 3 percent as investors worried the move could signal weakening demand due to an economic slowdown.

Qualcomm raised its financial targets for the quarter, but this was not enough to impress investors who expected higher volume chip sales for a quarter during which devices like the next Apple Inc iPhone are expected to launch.

Chief Financial Officer William Keitel said wireless device makers are reducing inventories because they had built excess stockpiles on concerns about supply shortages in the aftermath of the earthquake in Japan earlier this year.

Keitel said Qualcomm customers were being cautious even as he saw no evidence of slowing demand from consumers.

With a relatively modest world economy, it's an environment where our customers are extra judicious, Keitel said in a telephone interview.

By the end of this quarter Qualcomm customers will have cut about a week's worth of inventory, according to Keitel, who said they had kept roughly enough inventory for 15 weeks at the end of June.

It's a fairly small adjustment, Keitel said, who added that inventory levels averaged between 15 and 20 weeks over the last several years, but inventories in general had become leaner after the 2008/2009 global economic crisis.

ECONOMY WORRIES

Qualcomm forecast wireless chip shipments for the current quarter in a range of 120 million to 125 million compared with analyst expectations for 130 million and higher and its fiscal third-quarter report of 120 million shipments.

The market's nervous that the economy is slowing. Any hints of that in quarterly calls is not being taken well by investors, said Morgan Keegan analyst Tavis McCourt who had expected 135 million chip shipments this quarter.

While quarter ending in September usually shows modest sequential growth the forecast was a little lighter than normal, McCourt said.

Qualcomm's report came on the same day that chip giant Intel Corp trimmed its forecast for 2011 personal computer unit sales, sending its shares down.

However, Qualcomm raised its earnings per share guidance for the full year 2011 to a range of $3.15 to $3.20 from its previous expectation for $3.05 to $3.13.

It also increased its revenue target for the year to a range of $14.7 billion to $15 billion from its previous expectation of $14.1 billion to $14.7 billion.

Keitel attributed the higher revenue and profits to improving technology license sales because a greater percentage of phones being sold were smartphones, which command higher license fees.

Qualcomm's profit rose to $1.035 billion, or 61 cents per share, for its fiscal third quarter ended in June 26 from $767 million, or 47 cents per share, in the year-ago quarter.

Excluding unusual items, it earned 73 cents per share, ahead of analyst expectations for 71 cents per share, according to Thomson Reuters I/B/E/S. Revenue rose to $3.62 billion from $2.7 billion. Qualcomm shares fell to $55.75 in late trading after closing at $57.30 in the regular Nasdaq session.

(Reporting by Sinead Carew; editing by Andre Grenon)

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