We reiterate our long-term Neutral recommendation on
). The company posted mixed financial results for the second
quarter of fiscal 2013.
Why Kept at Neutral?
We believe that Qualcomm will continue to perform wellon the
back of significant surge in the demand for smartphones and
tablets. The long-term fundamentals of the company remain
intriguing given the increasing demand for LTE-enabled mobile
handsets in the U.S.A., Japan, and South Korea, rapid transition
from 2G to 3G in China and India, and increasing licensing
revenues. Management is quite confident that it will be able to
retainits current pace of revenues and earnings growth for at
least the next five years.
Qualcomm has firmly established its leadership position in the
high-end smartphone segment. It has a diversified client base.
Qualcomm supplies mobile chipset for all three major operating
systems, namely iOS of
), Android of
) and Windows Phone of
). The company is a major chipset supplier for Samsung, which is
currently the largest seller of smartphones globally. Qualcomm
currently has a Zacks Rank #3 (Hold).
Nevertheless, the ongoing global economic volatility may
severely impact the telecommunications industry, which in turn
may negatively affect the demand for Qualcomm developed chipsets.
Qualcomm's future growth is dependent upon the continuous
deployment of CDMA/OFDMA-based network technologies.
If the emerging markets fail to maintain the current rate of
installing high-speed 3G, next-generation 4G or any hybrid 3G-4G
wireless networks, the demand for smartphones will decline, which
will negatively affect Qualcomm's financials. Aggressive
competition in the mobile phone chipset market may hurt
Qualcomm's profit in the future.
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