Thank Your Stars If You Own This Stock, If Not Go Get It

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

In my previous article on semiconductor giant Qualcomm (NASDAQ: QCOM), I made an attempt to spell out the real reasons why this stock should help you reap benefits looking ahead. And now, it seems the good times are set to last all through this year based on the same fundamentals. The company posted a whopping 36% y-o-y rise in profits that beat analyst estimates by a long way. Revenue witnessed a similar 29% upsurge. But, what’s really reassuring about the company is that it has raised its guidance for the quarter, without being optimistic about an early relief from the current macro-economic headwinds. Increasing purchase of smartphones in emerging nations and an expected upsurge in its licensing revenue should be enough to do the job, the company feels, and it’s probably quite right in its assumptions. After all, not everyone can boast of a customer base that includes giants like Apple and Samsung. Not to mention the Blackberry BB10 newbies.

Qualcomm’s really being clever and that’s why it should have a smooth ride, at least for the current year. On one hand, the company’s banking on more people in emerging nations acquiring smartphones (mostly powered by Qualcomm’s semiconductors), given the huge 3G penetration gap there. On the other hand, it knows that the spread of faster 4G LTE networks for developed nations would require a whole new generation of smartphones. That’s a win-win situation either way, as Sanford C. Bernstein & Co.’s Stacy Rasgon has summed it up so well. Any production hiccups related to the new generation 28-nanometer chips that the company faced with its partner Taiwan Semiconductor Manufacturing Company have also been smoothed out by now. And the competition’s either lagging behind or venturing into other areas apart from mobile processors.

For instance, fellow chip-maker Texas Instruments (NASDAQ: TXN) is already bogged down by the macro-economic issues, and faces a distinct slowdown in future demand. This has led to unfortunate job cuts and a complete shift in focus to automotive and other segments. TI has effectively called it a day as far as mobile processors are concerned, paving the way for Qualcomm.

But, where Texas Instruments could not go beyond the Amazon Kindle Fires and the Nooks from Barnes and Noble, graphics processor specialist NVIDIA (NASDAQ: NVDA) has made it really big in the tablet space. The latter’s Tegra line of processors have gained sizeable market share in the tablet industry and can be found in a host of popular products,  including Google’s Nexus 7 and Microsoft’s Surface RT variety. That still excludes NVIDIA from two things though – Apple and the mobile processor space. At the same time, Qualcomm just cannot afford to get complacent. NVIDIA’s acquisition of wireless-chip specialist Icera is slated to lead to the creation of a completely new generation of chips capable of catering to the 4G LTE specifications, not to mention the older networks. Assuming they would be competitively priced, this would not be good news for Qualcomm. Sometime in the near future, the company’s Snapdragon line-up has to go in for a makeover.

Till then, Qualcomm’s headstart in the 4G LTE scenario should see it a long way through. Any worries about Intel along the way are also fast disappearing, with the global slowdown in the PC industry. Qualcomm does not even have to worry about maintaining its own fabs, contrary to Intel. And then there’s the 2G to 3G transition in countries like China. This is set to be one good year for Qualcomm. Fool on!  


subhadeeptech has no position in any stocks mentioned. The Motley Fool recommends NVIDIA. The Motley Fool owns shares of Qualcomm. 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!

blog comments powered by Disqus