QCOM Boosts Shareholders' Wealth - Analyst Blog


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Yesterday, Qualcomm Inc. ( QCOM ) announced that its board of directors has approved a 16% hike in dividend rate effective immediately. Quarterly dividend rate moved up to 25 cents per share from 21.5 cents per share. Annualized dividend rate will be $1 per share. In addition, the board also authorized a new $4 billion share buyback program. The new stock repurchase program will replace the company's existing $3 billion program, which had approximately $948 million of repurchase authority remaining. Qualcomm declared that the new plan, with $3.5 billion (net of 3 outstanding put options for total cost of $511 million) of available authority, has no expiration date.

During the last 12 months, Qualcomm continued with its dream performance. In the previous quarter, net income was up 20% year over year and a massive 33% sequentially, reflecting the company's operating efficiency. It has nearly $22 billion of cash and marketable securities on its balance sheet. Management is quite confident that the company will be able to maintain its current pace of top- and bottom-line growth for at least the next five years.

We believe there are primarily four reasons for this positive outlook: (1) gradual introduction of 4G LTE enabled mobile handsets in the developed markets of the U.S., Japan, and South Korea (2) massive growth of 3G smartphones in the emerging markets, particularly in China, where the company has a strong foothold (3) Qualcomm's growing association with Apple Inc. ( AAPL ) for its legendary iPhones and iPADs and (4) a diversified product portfolio. 

Furthermore, Qualcomm received a shot in its arm from the upcoming Windows 8 operating system of Microsoft Corp. ( MSFT ). The two entities are collaborating to develop chipsets from Snapdragon platform for notebook and tablets that will use Windows 8 operating system. In addition, Qualcomm's Gobi mobile Internet connectivity solutions will provide 3G/4G LTE connectivity to those devices that will run on Windows 8 software. Snapdragon also supports Windows Phone 7 operating system. Qualcomm is the sole chipset developer for both Windows smartphones and Windows notebooks.

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