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QUALCOMM, Inc. (QCOM): Make Hay While the Sun Shines With This Stock

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QUALCOMM, Inc.Semiconductor manufacturer QUALCOMM, Inc. (NASDAQ:QCOM) seems to have bucked the trend once again. Thanks to disappointing earnings results reported by smartphone manufacturing companies such as HTC and Samsung Electronics, industry watchers became worried about signs of a slowdown in smartphone adoption around the world.

But then, with QUALCOMM, Inc. (NASDAQ:QCOM)’s revenue and net income both remaining above Street expectations in its third-quarter results, such doubts seem to have been dispelled, at least for the time being. And the situation seems to be doubly reassuring, given the fact that Qualcomm’s results have become a bellwether for companies manufacturing chips that are largely directed towards mobile devices such as smartphones and tablets.

However, even if things start slowing down at a later period, here’s a lowdown of why QUALCOMM, Inc. (NASDAQ:QCOM) should comfortably be able to make it through the tough times.

The good things that have happened

The primary factor that seems to have worked in Qualcomm’s favor is the increasing trend of transition from 2G to 3G technology-based networks in emerging nations such as China and India, a fact which I had outlined in my previous blog. Given the massive population in these countries, that is a very welcoming trend for QUALCOMM, Inc. (NASDAQ:QCOM). That’s because it leads to a distinct possibility of more and more customers upgrading their handsets into better and ‘smarter’ varieties, translating into higher ‘average selling prices’ of such handsets — a key determinant that has worked in favor of Qualcomm in its latest reported quarter.

Apart from the transitioning trend, wireless telecom carriers are also offering more incentives for customers wishing to upgrade their handsets. And then, there’s the certainty of more handset releases in anticipation of the upcoming holiday season. All these factors have, in turn, boosted the confidence of QUALCOMM, Inc. (NASDAQ:QCOM)’s management, as its declaration of average selling prices for the rest of the year exceeded earlier company predictions. Going ahead, the company’s prediction of current fourth-quarter revenue has also exceeded analysts’ expectations.

The 4G LTE factor

Talking of incentives, even wireless carriers in developed regions are offering them in greater degrees, as the carriers race ahead of each other to upgrade networks from older 3G technology to more advanced Long Term Evolution (LTE)-based technology. And, it’s an obvious assumption that the benefits of a 3G to 4G based technological transition are enjoyed mainly by QUALCOMM, Inc. (NASDAQ:QCOM) since it has the first-mover advantage in this area.

While rivals such as Intel Corporation (NASDAQ:INTC) and NVIDIA Corporation (NASDAQ:NVDA) huff and puff at their attempts to design 4G integrated chipsets, Qualcomm is already generations ahead and enjoys a whopping 86% share of the global 4G LTE-enabled chipset market.

The competition

And while rival NVIDIA Corporation (NASDAQ:NVDA) is presently concentrating on licensing its graphics technology to customers, apart from building a gaming console named Project Shield, chip behemoth Intel Corporation (NASDAQ:INTC) is forever ramping up its efforts to prove itself as a worthy competitor to Qualcomm. Not that it has had much success though. With less than 1% share of the market for chips manufactured for mobile devices,Intel Corporation (NASDAQ:INTC) continues to be a laggard in this area.

And while Intel’s ‘Atom’ line of processors have somewhat changed its previous ‘high energy at the rate of high power’ perception, it still hasn’t found a proper foothold with regard to LTE-enabled chips, one of Qualcomm’s primary areas of strength.

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