l******n
发帖数: 507 | 1 Smartphones are everywhere, and there will undoubtedly be many long-term
winners in the field.
But we're also in the midst of a platform war between Google's Android and
Apple's iPhone. As the battle intensifies, there's a tremendous amount of
uncertainty about which companies will dominate the field five years from
now.
However, the one certainty investors can bank on is that small, mobile,
connected device demand will continue surging across that time. And there's
one company that is perfectly positioned to profit immensely from that
certainty: Qualcomm [Nasdaq: QCOM].
Qualcomm: A history of innovation
Take a swing by Qualcomm's San Diego headquarters and you'll immediately be
greeted with an unusual sight. The company literally has a wall of patents.
Qualcomm's proud of its history of innovation and the vast patent portfolio
that resulted. The wall's a reminder of that. However, the wall is also a
statement of something else:
Qualcomm has patented the technology behind every 3G data network in the
world.
If you want to use a phone that can connect to a modern data network,
Qualcomm is profiting.
How Qualcomm did it
To understand how Qualcomm gained such vast influence over the telecom
industry, take a look at the company's past. Qualcomm was founded by a team
of engineering geniuses who had a radical plan to reshape the wireless
industry. In the late 1980s cellular networks were extended beyond capacity.
Qualcomm believed it had the solution to fix the problem, a technology
known as Code Division Multiple Access (CDMA), which was much more efficient
than any existing or future technologies.
However, the wireless industry is standards-driven, and by the time Qualcomm
began heavily pushing for its solution, most of the world had already
coalesced around a different technology. While Qualcomm's solution worked
best on paper, there were a number of powerful detractors who said the
technology would never work in real life and loudly opposed CDMA's use. The
company was essentially alone to both patent and promote its technology.
Despite vast challenges, Qualcomm managed to persuade a limited number of
wireless companies to go against the industry and adopt its standard. To get
support, Qualcomm had to build the handsets for its technology, build the
network equipment, and train its partners in how to work with this new,
complex technology. In short, it was a small start-up that had to do
everything required to get a massive network off the ground. The odds
against Qualcomm getting traction were staggering, but the company
eventually succeeded in widespread adoption of its technology.
The patent king
Qualcomm later got out of capital-intensive fields like making cell phones
and network equipment. However, the experience of learning how to best
optimize its technology across wireless networks proved invaluable. The
company used this experience to build out a massive patent portfolio for its
CDMA technology.
With most patent companies there's uncertainty around whether their patents
will hold up or how much money the company can generate from the patents.
Not with Qualcomm.
In the wireless world, the only two certainties are death and paying
Qualcomm. While each of its license contracts differs, Qualcomm has said it
typically receives royalties that range between 4%-5% of the wholesale
selling price on phones utilizing its technology. Many top of the line
smartphones have wholesale prices up to $600. That means Qualcomm could be
collecting up to $30 on each of those smartphones flying off the shelves
with little to no costs incurred.
To make matters even more compelling, Qualcomm used the knowledge it gained
from implementing CDMA to start selling chipsets based on the technology.
The company's closely held trade secrets assure that it's extremely
competitive in the space. Thanks to that expertise, Qualcomm is one of the
largest chip makers in the world.
The buy opportunity
Qualcomm's share price struggled over the last year because of concerns over
declining phone selling prices and fear over a transition from 3G networks
(the current standard) to newer 4G networks where Qualcomm's patent
portfolio is a bit weaker and hasn't withstood the same legal challenges.
These concerns are overblown for a couple of reasons.
First, the lower selling prices mean Qualcomm collects less royalty revenue
per phone. However, the volume gains from emerging countries should more
than compensate for any selling price declines in developed countries like
the U.S. Many emerging markets are just launching 3G networks, and growth
rates should be fantastic in coming years.
Also, the growth of Google's Android has been a huge boon for Qualcomm. Not
only have Android sales helped prop selling prices back up, but Qualcomm has
scored a number of high-profile wins on Android phones in its chipset
business. As Android excels, Qualcomm's own future becomes brighter.
Secondly, Verizon and AT&T have begun transitioning to 4G wireless networks.
Qualcomm still has strong patents behind this technology, stating that its
royalty revenue is expected to be 3.25% on the standard that Verizon and AT&
T are moving toward. While this royalty rate is less than on 3G, phones will
still have to connect to 3G networks over the foreseeable future as 4G
networks will mainly focus on urban build-outs. That means Qualcomm's
royalty revenues shouldn't take much of a hit from this technology
transition.
Also, AT&T's and T-Mobile's recent decisions to upgrade existing 3G networks
demonstrate that carriers remain dedicated to maintaining strong 3G
networks, even after the next generation of technology rolls out. Reports of
3G's death have been greatly exaggerated.
Bottom line and risks
Recently Qualcomm has moved above the $50-per-share fair value at which I'd
assess the company. So if you want to buy, don't overpay if Qualcomm's price
keeps climbing.
In the long run, the greatest threats to the company are legal challenges to
its patent portfolio, added competition in its chipset business, and the
threat that its technology isn't utilized in future wireless technologies.
However, with its position in the driver's seat for both the current and
next generation of technology, Qualcomm's an extremely safe bet with some
fantastic growth opportunities. If you're looking to get back into the
market or build out your portfolio, Qualcomm's a top stock pick to get
started. | l******n
发帖数: 507 | 2 Smartphones are everywhere, and there will undoubtedly be many long-term
winners in the field.
But we're also in the midst of a platform war between Google's Android and
Apple's iPhone. As the battle intensifies, there's a tremendous amount of
uncertainty about which companies will dominate the field five years from
now.
However, the one certainty investors can bank on is that small, mobile,
connected device demand will continue surging across that time. And there's
one company that is perfectly positioned to profit immensely from that
certainty: Qualcomm [Nasdaq: QCOM].
Qualcomm: A history of innovation
Take a swing by Qualcomm's San Diego headquarters and you'll immediately be
greeted with an unusual sight. The company literally has a wall of patents.
Qualcomm's proud of its history of innovation and the vast patent portfolio
that resulted. The wall's a reminder of that. However, the wall is also a
statement of something else:
Qualcomm has patented the technology behind every 3G data network in the
world.
If you want to use a phone that can connect to a modern data network,
Qualcomm is profiting.
How Qualcomm did it
To understand how Qualcomm gained such vast influence over the telecom
industry, take a look at the company's past. Qualcomm was founded by a team
of engineering geniuses who had a radical plan to reshape the wireless
industry. In the late 1980s cellular networks were extended beyond capacity.
Qualcomm believed it had the solution to fix the problem, a technology
known as Code Division Multiple Access (CDMA), which was much more efficient
than any existing or future technologies.
However, the wireless industry is standards-driven, and by the time Qualcomm
began heavily pushing for its solution, most of the world had already
coalesced around a different technology. While Qualcomm's solution worked
best on paper, there were a number of powerful detractors who said the
technology would never work in real life and loudly opposed CDMA's use. The
company was essentially alone to both patent and promote its technology.
Despite vast challenges, Qualcomm managed to persuade a limited number of
wireless companies to go against the industry and adopt its standard. To get
support, Qualcomm had to build the handsets for its technology, build the
network equipment, and train its partners in how to work with this new,
complex technology. In short, it was a small start-up that had to do
everything required to get a massive network off the ground. The odds
against Qualcomm getting traction were staggering, but the company
eventually succeeded in widespread adoption of its technology.
The patent king
Qualcomm later got out of capital-intensive fields like making cell phones
and network equipment. However, the experience of learning how to best
optimize its technology across wireless networks proved invaluable. The
company used this experience to build out a massive patent portfolio for its
CDMA technology.
With most patent companies there's uncertainty around whether their patents
will hold up or how much money the company can generate from the patents.
Not with Qualcomm.
In the wireless world, the only two certainties are death and paying
Qualcomm. While each of its license contracts differs, Qualcomm has said it
typically receives royalties that range between 4%-5% of the wholesale
selling price on phones utilizing its technology. Many top of the line
smartphones have wholesale prices up to $600. That means Qualcomm could be
collecting up to $30 on each of those smartphones flying off the shelves
with little to no costs incurred.
To make matters even more compelling, Qualcomm used the knowledge it gained
from implementing CDMA to start selling chipsets based on the technology.
The company's closely held trade secrets assure that it's extremely
competitive in the space. Thanks to that expertise, Qualcomm is one of the
largest chip makers in the world.
The buy opportunity
Qualcomm's share price struggled over the last year because of concerns over
declining phone selling prices and fear over a transition from 3G networks
(the current standard) to newer 4G networks where Qualcomm's patent
portfolio is a bit weaker and hasn't withstood the same legal challenges.
These concerns are overblown for a couple of reasons.
First, the lower selling prices mean Qualcomm collects less royalty revenue
per phone. However, the volume gains from emerging countries should more
than compensate for any selling price declines in developed countries like
the U.S. Many emerging markets are just launching 3G networks, and growth
rates should be fantastic in coming years.
Also, the growth of Google's Android has been a huge boon for Qualcomm. Not
only have Android sales helped prop selling prices back up, but Qualcomm has
scored a number of high-profile wins on Android phones in its chipset
business. As Android excels, Qualcomm's own future becomes brighter.
Secondly, Verizon and AT&T have begun transitioning to 4G wireless networks.
Qualcomm still has strong patents behind this technology, stating that its
royalty revenue is expected to be 3.25% on the standard that Verizon and AT&
T are moving toward. While this royalty rate is less than on 3G, phones will
still have to connect to 3G networks over the foreseeable future as 4G
networks will mainly focus on urban build-outs. That means Qualcomm's
royalty revenues shouldn't take much of a hit from this technology
transition.
Also, AT&T's and T-Mobile's recent decisions to upgrade existing 3G networks
demonstrate that carriers remain dedicated to maintaining strong 3G
networks, even after the next generation of technology rolls out. Reports of
3G's death have been greatly exaggerated.
Bottom line and risks
Recently Qualcomm has moved above the $50-per-share fair value at which I'd
assess the company. So if you want to buy, don't overpay if Qualcomm's price
keeps climbing.
In the long run, the greatest threats to the company are legal challenges to
its patent portfolio, added competition in its chipset business, and the
threat that its technology isn't utilized in future wireless technologies.
However, with its position in the driver's seat for both the current and
next generation of technology, Qualcomm's an extremely safe bet with some
fantastic growth opportunities. If you're looking to get back into the
market or build out your portfolio, Qualcomm's a top stock pick to get
started. |
|
