Picks and axes
During the California gold rush of the 1800s, it was those people who sold the picks and axes who made fortunes. In the context of smartphones, chips take the place of picks and axes, making Qualcomm a superb investment idea. Over the long term, Qualcomm will benefit not only from a larger installed base of chips, but also from the royalties its holds for its 3G/4G patent portfolio. Together, this could be a one-two punch in terms of earnings potential. A P/E of 20 doesn’t seem all that high for a company with such bright prospects as Qualcomm has.
Can’t we all just get along?
With such a low saturation of smartphones compared to mobile phones, investors can expect years of great growth ahead for the entire industry. Google Inc (NASDAQ:GOOG) will likely continue benefitting by unlocking more value out of its Android platform. Apple Inc. (NASDAQ:AAPL) is poised to hold its market share until 2016, but the power of compounding should do wonders for its unit growth. Microsoft stands to gain a new user base, and should command more than 11% of the smartphone market by 2016. Nokia Corporation (ADR) (NYSE:NOK) is a toss-up, given the shift away from the feature phone and into its smartphone, and it depends if Nokia Corporation (ADR) (NYSE:NOK) can successfully navigate the transition. And, Qualcomm should sell a heck of a lot more chips, all while earning more royalties. Perhaps the smartphone industry is the ultimate definition of a megatrend? There seems to be enough of an untapped market for all the players to stretch out and grow.
The article The Trillion-Dollar Smartphone War Has Just Begun originally appeared on Fool.com and is written by Steve Heller.
Fool contributor Steve Heller owns shares of Apple and Google. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, Microsoft, and Qualcomm.
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