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In a previous piece, we argued that Intel (NASDAQ:INTC) is a good buy for the upcoming earnings season, because of its low valuation, solid company and industry fundamentals, and high dividend payout.

Here we look at another technology company that we think is also a good buy, Qualcomm (NASDAQ:QCOM), an innovator and leader in CDMA-based integrated circuits and Radio Frequency (RF) and Power Management (PM) chips and system software that power mobile devices and wireless networks.

Company

Recent Price

Forward P/E

Intel (INTC)

$22.80

9.52

Advanced Micro Devices (NYSE:AMD)

7

9.33

Nvidia (NASDAQ:NVDA)

15.67

12.54

Texas Instruments (NASDAQ:TXN)

32.89

11.99

Qualcomm (QCOM)

58.6

16.72

Broadcom (NASDAQ:BRCM)

34

11.35

Source; Yahoo.finance.com

By contrast to Intel that trades near to the low end of its trading rangebelow its 2000 high, Qualcomm trades near the upper end of its trading rangeat a new high; and it has the highest PE among its peers. Intel and Qualcomm have comparable financials. So which of the two companies is a better buy?

Intel versus Qualcomm Price Performance (2000-11)

Intel

Qualcomm

Year

Price*

Price*

2000

25.20

$37.12

2004

19.93

38.78

2008

23.95

34.36

2011

23.09

59.36

Source: yahoo.finance.com

Intel versus Qualcomm Financial Performance Statistics in 2011

Intel

Qualcomm

Dividend

3.10

1.50

Operating Margins

35.30

33.41

Qtrly Earnings Growth (yoy):

29.40%

29.10%

Qtrly Revenue Growth (yoy):

24.40

45.50

Source: yahoo.finance.com

The answer depends on the investor profile. For conservative investors who want a high dividend payout, Intel may be a better choice. But for more aggressive investors, Qualcomm is a better choice for four reasons.

1. Size. With $12 billions in sales Qualcomm is less than a third of Intel’s size. This means that the law of large numbers work better for Qualcomm, as are the laws of economies. While Qualcomm is at the threshold where returns scale takes full effect, Intel is approaching the threshold where constant or even decreasing returns to scale begin to kick in.

2. 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, Qualcomm strengthened its leadership in the industry.

3. Better industry fundamentals. While Intel remains the leader in the mature PC industrythough Intel has made several moves into wireless communications in recent years. Qualcomm maintains leadership in wireless communications still an emerging industry. Wireless Intelligence estimates that the number of 3G users will reach 2.8 billion by 2014.

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

Source: Whether Qualcomm Is a Better Choice Than Intel