Buy Qualcomm (QCOM) for the long view and ride the mobile growth curve over the next few years as its supply issues are resolved by bringing on capacity at other foundries.
Qualcomm reported calendar Q2 revenue Wednesday of $4.63B down 6.4% sequentially from Q1, missing slightly the company's guidance of sequentially down -5.9%. GAAP Earnings for Q2 were $0.69/share and non-GAAP earnings were $0.81/share. Both missed company guidance by a penny.
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The mid-point of revenue guidance for calendar Q3 was up 0.5% sequentially, with GAAP earnings of $0.65/share and non-GAAP earnings of $0.81/share.
The graph below breaks out the revenue trends by business reporting segments.
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Chip Revenue
Qualcomm's largest revenue segment derives from its mobile communication chips and application processors. Qualcomm competes with Nvidia (NVDA) and Texas Instruments (TXN) in application processors in addition to Broadcom (BRCM) and Intel (INTC) in baseband processors and other connectivity devices. The company has the largest market share in both markets outside of captive application processors by Apple (AAPL) and Samsung (SSNLF.PK) in their own devices.
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Qualcomm in its Q2 earnings conference call cited:
We continue to be supplies constrained on our 28 nanometer products but are ramping supply with multiple foundries in the September quarter and again into the December quarter consistent with our prior expectations. We currently project that we'll be able to closely match supply with demand as we exit the calendar year.
Licensing Revenue
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On the Q2 conference call management cited:
QTL continues to grow and expand its base of licensees, and we now have over 215 CDMA licensees, including our first major Brazilian licensee, Digibras Group. We now also have more than 25 royalty-bearing, single-mode OFDMA licensing -- licensees. And as with 3G, we believe that our 4G portfolio is the most widely licensed in the industry.
Cash and Dividend
$26.5B in cash and a $0.25 quarterly dividend yielding at an annual rate of 1.8%.
Conclusion
Qualcomm is in the sweet spot of the mobile revolution along with Apple and Samsung. As mobile grows so will Qualcomm. Do you buy now or hope for a fade? I'm not sure, but if you believe smartphones and other mobile devices will take over from PCs as the number one computing devices then Qualcomm is the chip company for you.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in QCOM over the next 72 hours.
