Wireless chip and technology supplier Qualcomm Inc issued a revenue target for the current quarter that was below Wall Street expectations, sending its shares down about 5 percent.

Qualcomm, which also posted a small drop in fiscal third-quarter profit, forecast fourth-quarter revenue of $2.55 billion to $2.75 billion, implying a midpoint of $2.65 billion, which is well below analysts' average estimate for $2.72 billion, according to Reuters Estimates.

While Qualcomm had warned in early June that chip shipments could fall this quarter, many investors had hoped that its sales would end up being better than expected. Charter Equity Research analyst Ed Snyder said this is unlikely to happen.

A good portion of the chips they shipped last quarter went to restocking depleted inventory. That won't happen again this quarter because the shelves are stocked now and consumer demand hasn't increased, he said.

Other analysts said Qualcomm was facing weaker demand in China this quarter compared with the quarter that just ended.

Recently there had been some expectation they might be able to give September quarter guidance above the Street expectations, Pacific Crest analyst James Faucette said. In the June quarter you had a very strong build ... from CDMA promotions in China. Now we're coming down off that and the outlook for the China market is a little murky.

Qualcomm investor relations executive Bill Davidson said the company typically sees some seasonal weakness in its fiscal fourth quarter ahead of stronger sales in the year-end holiday shopping season.

The company said the underlying fundamentals of its business were strong despite global economic uncertainty that had been causing chip customers to cut orders in order to reduce inventory.

We believe that the significant CDMA inventory contraction observed in the first and second quarters has ended, Qualcomm Chief Operating Officer Bill Keitel told analysts on a conference call.

Qualcomm on Wednesday posted a profit of $737 million, or 44 cents per share, for its fiscal third quarter, ended June 28, down from $748 million, or 45 cents a share, in the year-ago period.

Excluding items, its profit per share was 54 cents, compared with analysts' average estimate of 51 cents, according to Reuters Estimates.

Revenue fell slightly to $2.75 billion from $2.76 billion a year ago and was just ahead of analysts' average estimate of $2.74 billion according to Reuters Estimates.

Qualcomm, which competes with Texas Instruments Inc in the market for cellphone chips, raised its full-year revenue guidance.

It said that it now expects fiscal year 2009 revenue of $10.25 billion to $10.45 billion, up from its previous expectation of $9.85 billion to $10.25 billion.

The midpoint of the new forecast, $10.35 billion, fell short of the $10.43 billion expected by analysts, according to Reuters Estimates.

Qualcomm shares fell to $46.54 in after hours trading, after closing at $48.45 on the Nasdaq. Its stock had risen about 9 percent in the last week on expectations for a strong quarterly report.

(Reporting by Sinead Carew; Editing by Richard Chang)