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Anyone who follows closely the charts of Qualcomm (NASDAQ:QCOM) and Texas Instruments (TXN) has probably noticed that Qualcomm has been beating Texas Instruments in the long run, while Texas Instruments has been beating Qualcomm in the short run. Does it mean that the two stocks are about to trade places?


(Click to enlarge)


(Click to enlarge)

I don't think so, especially after Texas Instruments' disappointing Q4 report on Tuesday. Qualcomm is in a better position to ride the exploding market for mobile devices than Texas Instruments.

Company

Recent Price

Forward P/E

Intel (NASDAQ:INTC)

$21.57

10.14

Advanced Micro Devices (NYSE:AMD)

2.70

--

Nvidia (NASDAQ:NVDA)

12.07

12.54

Texas Instruments

33.08

15.37

Qualcomm

65.16

13.61

Broadcom (NASDAQ:BRCM)

34.37

11.65

Source; Yahoo.finance.com

Texas Instruments versus Qualcomm Financial Performance Statistics in 2011

Texas Instruments

Qualcomm

Dividend

2.50

1.50

Operating Margins

22.55%

30.12

Qtrly Earnings Growth (yoy):

30.40%

20.40%

Qtrly Revenue Growth (yoy):

-2.20

18.30

Source: yahoo.finance.com

Qualcomm has four advantages over Texas Instruments:

1. Better company fundamentals: As a pioneer of CDMA technology, Qualcomm enjoys the "first mover" advantage in wireless communications; and with the recent acquisition of Atheros Communications (NASDAQ:ATHR), Qualcomm has strengthened its leadership in the industry.

Reflecting these strong fundamentals, the company has experienced a strong sales and profit growth, while Texas Instruments has experienced a negative sales growth.

2. Better industry fundamentals: While Texas Instruments is the leader in a number of diverse industries - some already mature - Qualcomm maintains leadership in wireless communications, which is still an emerging industry. Wireless Intelligence estimates that the number of 3G users will reach 2.8 billion by 2014.

3. Riding the industry upgrade cycle: Qualcomm is expected to be the main beneficiary of the wireless communication upgrade cycle. The GSM Association expects telecom providers to spend $100 billion by 2015 - in High-Speed Packet Access (HSPA), 3G, and 4G.

4. Qualcomm is less sensitive to an economic downturn than Texas Instruments. In fact, the company cited the weak economy (mostly on Europe) as the reason for its earnings miss on Tuesday.

The bottom line: Qualcomm is beating Texas instruments on fundamentals. That's why it is a better bet than Texas Instruments for long-term investors.

Source: Qualcomm Or Texas Instruments?