QualComm: Chasing More Silicon

By Vijay Nagarajan, Guest Author

In the previous piece, we reviewed the revenue and valuation impact of potential pitfalls for QualComm. As I mentioned, a sustained future growth seemed tenuous. Let us see how QCOM might address this in the next 2-3 years –

• Expansion, going beyond the mobile phone: The future is for convergence devices. I am a great believer in the integration of wireless technologies resulting in ONE device. The Gobi announcement that came a few days ago was something I was expecting QCOM to do for some time now. It is not as much an anti-WiMax statement as it is an understanding of the market pulse. Besides giving QCOM a footprint in the PC/laptop segment, the chipset also gives it a lead in device integration. And as the company representatives pointed out, if there is a need for WiMax, QCOM will address it. To keep this piece short, I will direct you to my blog for more on my Gobi thoughts. I also strongly believe that this is indicative of more diversification moves to come from QCOM, especially increasing its foray into the PC/laptop market.
• 3GPP growth: I have assumed a cap of 25% on its 3GPP market share in my earlier analysis. It is possible that QCOM is betting on some companies to increase their handset market share, especially as smart-phone sales take off. If this pays off, its market share will go up by about 10%.
• Look who is back: As data takes the forefront, and modem performance becomes more important, some vendors who have looked away from QCOM may come back. The QCOM receiver is perhaps the most advanced, thorough, stable and well tested product out there. With R&D two generations ahead of the competition, the engineering superiority is never in question. The caveat is a slight change in the heart of the QCOM management and a reduced royalty rate. And I think both of these are good for the company in the long run as it strives to get more chipset market share. We may see Motorola coming back to QCOM for 2010 and beyond. And who knows, maybe Nokia too!

While the first point signifies a leap into new markets, the second and third are market share growth imperatives. In the sequel, I will address the valuation with these positives and then subsequently conclude this long-running series with a peek into its 4G strategy and long-term sustenance.

This segment is a part in the series : QualComm