Qualcomm Looks Like The Winner In The Smart Phone Chip War
2 comments | November 8, 2011 | about: QCOM, includes: AAPL, INTC, MSFT, NOK
Qualcomm ( QCOM) closed out the books on a solid fourth quarter with revenues rising by 39% year over year to $4.12 billion. Guidance for 2012 was issued with $18-19 billion in revenues and $3.42-3.62 in non-GAAP diluted EPS.
Currently, there are over 200 royalty-bearing 3G licenses and 12 single-mode OFDM licenses around the world as consumers migrate from 2G to 3G. Shipments of Integrated Snapdragon chipsets grew by 4x last year as smart phone and tablet manufacturers realized the value in Qualcomm’s chipset.
The real news concerning Qualcomm did not come from the earnings call but rather came out in a number of announcements and discoveries over the past few weeks.
Qualcomm scored a major win with the iPhone 4S. According to iSupply, Intel’s ( INTC) overall share of the smart phone has gone from $10 in parts down to 50 cents, with Qualcomm taking over a portion of the chip design.
Microsoft ( MSFT) has gone so far with Windows 8 as to name Qualcomm their only partner in the smart phone area and the first round of Windows powered Nokia ( NOK) smart phones. Microsoft even went so far as to demonstrate a Windows 8 PC running on Snapdragon at the BUILD conference. The Windows 8 PC was shown to run on a low-power mode and remain on the network and up to date, showcasing features similar to smart phones.
This is not to say that we are going to see Snapdragon powered PCs and laptops in the near future but it represents how powerful the new Snapdragon chips have become.
This helps Microsoft dispel one of its primary problems. Windows has a reputation as being somewhat of a memory hog and slow to startup relative to smart phones and tablets.
More importantly, it demonstrates the power and capabilities of Snapdragon ships. This does not threaten Intel but it helps in a number of areas. First, it keeps them out of the tablet and smart phone space. Second, in the wake of Google’s ( GOOG) acquisition of Motorola Mobility smart phone manufacturers are worried about future versions of Android tailored to Motorola Mobility smart phones.
As a response, Google released the latest version of Android, named Ice Cream Sandwich, to Samsung as an inducement to stick with Android rather than try Mango. If Microsoft is able to make inroads into the OS space with handset manufacturers left out of the OS competition then by default with Snapdragon as a chipset partner, Qualcomm will benefit.
Just a few days ago, Qualcomm acquired the technology and other assets of HaloIPT, a developer of wireless charging technology for electric vehicles. This acquisition, if the technology can become commercially viable, opens tremendous new doors for Qualcomm in terms of chips and patent technology.
Investors looking at the technology sector are well advised to check out Qualcomm. The company has made a serious move into the smart phone and tablet sectors with Snapdragon and other chipsets securing design wins in the iPhone 4S and from Windows effectively marginalizing Intel. This is not to say that they are going to make a play in the PC market but as smart phone and tablet growth continue at rapid rates and PC and laptop demand slows Qualcomm is better positioned relative to Intel and others in the sector.
Disclosure: I am long QCOM, AAPL.
Additional disclosure: Source: Qualcomm earnings report and website, iSupply website.
[Johnny: QCOM was trapped in a range for the last 10 years. This might be news that finally allows it to break out of it range. It is still a few years off, but at some point QCOM`s initial patents will start to expire, so they need to be generating new patents all the time to keep their main revenue stream stable or growing. |
