) is expected to announce its fiscal year Q2 2011 earnings on
April 20th. Two particular developments that warrant a closer look
are the performance of multi-mode chipsets and the outlook for
Qualcomm's royalty rates. We believe that these factors could play
a key role towards weighting the upside or downside potential to
$53.82 price estimate for Qualcomm stock
, which is currently in line with market price. Qualcomm competes
with other chip makers like Texas Instruments (
), Broadcom (
) and Infineon (
Is Qualcomm Ready to Tap LTE Technology Growth?
LTE, which stands for Long Term Evolution, is the 4G technology
that will enable faster data transmission speeds to mobile devices.
For example, Verizon is in the process of upgrading its network to
LTE, and claims that the technology is capable of peak download
speeds of 40 to 50 Mbps and peak upload speeds of 20 to 25
Mbps. This transition is most notably speeding up in developed
Whether Qualcomm is ready to tap the growing LTE chipsets market
remains to be seen. During its fiscal year 2010 earnings conference
call, Qualcomm stated its intention to begin commercial production
of a multi-mode chipset that will enable mobile phone users to
transition from 3G to LTE technology. We previously discussed
this transition in a note titled '
Qualcomm's Multimode Chips to Help Market Share
However, it will be interesting to see if management can deliver
any further insight regarding its expectations for performance of
the multi-mode chipsets. Since LTE is expected to be a fast growth
market, Qualcomm's expanding presence in the LTE chipset market
could lift its chipset market share.
Qualcomm's Royalty Rates Could Increase in 2011
Qualcomm's royalty rates have been declining for the past few
years, dropping from 4.0% in 2008 to 3.2% in 2010.
However, the company's most recent outlook for royalty rates in
2011 seems positive. One reason for the expected up-tick in royalty
rates in 2011 comes from the resolution of a dispute with an
unnamed licensee that had been underpaying royalties.
Management has also mentioned that its guidance excludes the
expected positive outcome from its ongoing arbitration with
Panasonic. Panasonic alleges that Qualcomm breached a licensing
agreement and seeks the return of royalties paid to Qualcomm.
Could these events bring further improvement in royalty rates
for Qualcomm? This is one area we'll keep an eye on.
See our complete analysis for Qualcomm stock