) recently announced its fiscal year Q3 2011 earnings in which
it revised its revenue outlook higher for 2011 due to healthy
smartphone demand and revenue gains from the Atheros acquisition.
The company reported higher average selling prices for mobile
devices based on its technology that surpasses most
expectations. Qualcomm competes with Nvidia (
), Broadcom (NASDAQ:BRCM), Marvell (NASDAQ:MRVL), Infineon
(now acquired by Intel (
)) and Texas Instruments (
) in the mobile phone and tablets chispet markets.
Based on the earnings results and revised outlook, we have
updated our price estimate for
Qualcomm stock from around $57 to $59
. Our price estimate stands about 5% above market price.
Smartphone Demand Drivers ASPs
Qualcomm holds patents in CDMA, WCDMA, OFDMA technology
and is the leader in the baseband chipset market based on this
technology. The company earns royalties for each device sold and
given the booming growth of the smartphone market, average selling
prices (ASPs) are improving.
Qualcomm acquired Atheros in January this year for a valuation
of $3.2 billion, and in a recent note (
Atheros Acquisition Provides Immediate Upside for
), we discussed how this acquisition will help Qualcomm supplement
its existing chipset portfolio by including Atheros' Wi-fi,
Bluetooth, Ethernet and GPS chipsets. By integrating its chipset
portfolio with Atheros', Qualcomm will help sell its chips for
Based on the revised outlook, we have increased the chipset
average selling price for Qualcomm for 2011. However, we still
believe that increasing competitive pressure will force Qualcomm to
reduce its pricing in the medium to longer term time period.
To test the impact on its shares given changes in chip prices,
you can modify the chart above.
See our complete analysis for Qualcomm