Qualcomm (QCOM) Will Continue Strong Growth on Mobile Device Dominance - Barron's

March 19, 2012 9:44 AM EDT
Qualcomm (Nasdaq: QCOM) is starting to look a little bit like Intel (Nasdaq: INTC), all to the benefit of investors.

Over the weekend Barron's issued a report considering -- like Intel in the 1980s and 1990s dominating the PC business with its chips -- Qualcomm is now doing the same in the mobile device world.

Less of a household name than Intel, many will recognize devices utilizing Qualcomm's technology, starting with Apple (Nasdaq: AAPL). No official word has been issued by either company, but independent tear-downs affirm Qualcomm chips are being used in Apple devices like the iPhone and iPad.

Though the debate about whether PCs are going away anytime soon is ongoing, data suggests mobile devices are going to continue making gains. Recent data from research firm Gartner, for example, showed the global smartphone market doubling in size to over 1 billion units by 2015. Tablet sales are largely expected to be on a similar pace.

Barron's noted key investments by Qualcomm in the 1990s, leading the company to either make communications chips or license technology for virtually every 3G phone in existence. OEMs like Nokia (NYSE: NOK), Samsung, Motorola Mobility (NYSE: MMI), and HTC pay Qualcomm about $6 per each unit sold.

In total, royalties made up about 38 percent of Qualcomm's revs and 80 percent of earnings during 2011. Earnings rose 37 percent from 2010; a jump of 17 percent to $3.75 per share is expected for 2011.

Qualcomm also pushed for the adoption of more complex LTE technology for fourth-generation networks, versus many rivals looking for WiMax to become the standard. With the help of Apple and smart investments, Qualcomm has been able to solidify LTE as the 4G standard, continuing to collect royalties and increasing its patent wall all the way.

Beyond Apple, Qualcomm also sells connectivity chips and processors. When Microsoft's (Nasdaq: MSFT) Windows 8 launches later in 2012, Qualcomm's Snapdragon processors and other chips are expected to be used to power the new tablet and desktop devices.

Shares are up about 0.3 percent Monday morning.

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