Qualcomm Crushes It in 2012

Kyle is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Evaluating a company's Strengths, Weaknesses, Opportunities, and Threats (SWOT) allows us to develop a detailed picture of company's resources and competitive position in the market. Today, we take a look at chip maker Qualcomm (NASDAQ: QCOM), who's robust performance over the last three years has made it one of the most dominant names in Tech.

Strengths

OEM agnostic: Qualcomm chips are featured in iPhones, Galaxy IIIs, Nexus 4s, and Lumia 920s. No matter who wins – Apple, Samsung, Google, or Nokia – Qualcomm wins.

Market Leader: Qualcomm chips are increasingly being deployed in high end devices, allowing it to seize a dominant share of the fast growing mobile components market. The company recently surpassed chipmaking legend Intel by market cap.

<img src="/media/images/user_13882/3gunitshipments_large.PNG" />

(Source: Gartner, Company Data, Nomura Estimates)

High Volume: There are 300 million smart phone shipments coming up in 2013.

Consistant Growth: Since 2005, Qualcomm's Market Cap has grown by +82%; Revenues have increased by +312%; EPS +177%, and Cash and ST Securities by +239%.

War Chest: Qualcomm has $12.37 billion in cash and short term investments.

Bumper Year: Record revenues, earnings and MSM chipset shipments driven by increasing global consumption of wireless data across a diverse range of devices, particularly smartphones. Revenues have increased +28% YoY, Non-GAAP EPS (+16%), MSM chip shipments (+22%), Total Reported Device Sales (+25%).

Royalties: Qualcomm receives royalties on 1 billion-1.07 billion units. (And counting...)

Qualcomm Q4/2012 results vs. Q4/2011

<img src="/media/images/user_13882/qcomq4_large.PNG" />


(Source: Qualcomm IR)

Emerging Markets: Emerging markets are increasingly shifting to content friendly 3G, which helped Q3 global smartphone shipments increase 44% TO 173.7 million units, according to Canalys. Since Qualcomm supplies the market leaders, this shift has given Qualcomm a big boost. Company forecasts 14% 3G/4G unit growth in 2013

Dividends/Buybacks: Since 2003, Qualcomm has returned $19.5 billion to stockholders. QCOM shares soared from around $19 to $63 per share in the same period. $2.5 billion in stock repurchases remain under the Board's current authorization.

<img src="/media/images/user_13882/qcomdividends_large.PNG" />

(Source: Qualcomm IR)

Institutionally Owned: 82.60% of QCOM stock is held by Institutions.

Weaknesses

Supply bottlenecks: Qualcomm has had to trim it's Q4 estimates due to lack of supply of its 28 nm chips.

Where AAPL goes, QCOM follows: Despite its platform agnosticism, Qualcomm's stock tends to exhibit a strong correlation with Apple's performance.

Bellweather Stock: Qualcomm's stock price closely mirrors the market as a whole.

Opportunities

1000x: Global mobile traffic roughly doubled from 2010-2011. The mobile industry is currently preparing for x1000 mobile traffic growth by 2020. This surge in volume which will require additional spectrum as well as infrastructure. Qualcomm is in an ideal position to provide the latter.

3G China: China's 3G subscribers only account for 19% of its total subscriber base. China's top 3 mobile service providers are currently adding 10 million+ 3G subscribers a month.

Threats

Increased competition from Intel: Mobile devices are almost completely reliant on radio components. Intel's (system-on-a-chip (SoC) – codenamed “Rosepoint” –allows Intel (NASDAQ: INTC) to fully digitize WiFi components. In other words, Intel has built a near-infinitely shrinkable Wifi radio that only it is allowed to make, with an implied markup of around 600%. Ultimately, Intel may be able to shrink Rosepoint down to 14nm. Qualcomm will have to find a way to respond to this disruptive development within the next two years without violating Intel's copyrights.

Foolish Takeaway

Qualcomm has the kind of problems that other winning companies can only dream about. When the worst you can say about a cash flush, market leading company with record growth is that it mirrors the performance of the world's most valuable brand and has difficulty filling the flood of new orders for its products, it's a good bet that you're looking at a core holding in the making.  


FatalX has no positions in the stocks mentioned above. The Motley Fool owns shares of Intel and Qualcomm. Motley Fool newsletter services recommend Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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