Casting a “Broad” net
However, as I’d said, there’s more to Broadcom. The company’s chips will be powering several devices in emerging markets such as India, where it has penned deals with Micromax, Idea Cellular and Karbonn, all three of which cater to the burgeoning budget smartphone market in the country. In addition, Broadcom’s NFC controllers have witnessed strong adoption and the company aims to win double-digit market share in this technology by the end of the year.
Also, Broadcom’s 5G WiFi products have been gathering steam, and should continue to get better as more devices use this technology. Moreover, Broadcom expects its data center business to continue improving on the back of what it calls “a solid multi-year product cycle” with the roll out of new 10G, 40G, and 100G products.
While Broadcom Corporation (NASDAQ:BRCM)’s 3G baseband processors have done well, helping it perform better than expected in the previous quarter, the company is looking to take it to the next level. The company intends to step into 4G basebands next year, challenging the likes of QUALCOMM, Inc. (NASDAQ:QCOM) in the market.
According to Strategy Analytics, QUALCOMM, Inc. (NASDAQ:QCOM) commands a 52% market share of the global baseband processor market, but the company’s recently-released results spooked investors as QUALCOMM, Inc. (NASDAQ:QCOM)’s earnings guidance wasn’t up to the mark. It looks as if Qualcomm would be spending more on innovation to keep its lead in the market intact and ward-off threat from the likes of MediaTek, Broadcom, etc.
Thus, Broadcom seems to be following the right strategy by capturing the Asian smartphone market to complement its position inside flagship handsets. Since the company’s 3G baseband processors have already been received well, I would count on the 4G basebands to follow suit. Broadcom’s baseband business grew impressively last year, and with the moves the company is making, it can get even better.
The bottom line
It’s quite clear that Broadcom’s business is doing pretty well and it should improve going forward. The company’s diversification in different areas of connectivity, presence of Apple and Samsung as clients, and growth from emerging markets should help it improve in the future. Hopefully, the market would take note of its prospects and reward Broadcom Corporation (NASDAQ:BRCM) handsomely, while a decent dividend yield of 1.3% comes as a nice add on.
The article Has the Market Finally Recognized This Stock’s Potential? originally appeared on Fool.com and is written by Harsh Chauhan.
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