Since 1985, Qualcomm (NASDAQ:QCOM) has been on the cutting edge of technology. The company continues to offer solutions to modern customers but is also actively researching the future.
The company that began with a simple plan of "Quality Communications" has become a leader in mobile electronics, wireless Internet, and other increasingly essential products. Its chips power a variety of mobile devices, including the iPhone.
Qualcomm's stock portfolio has weathered ups and downs, but has held fairly steady recently, usually only moving up or down a few points.
Many are optimistic about Qualcomm's potential, especially since mobile technology and smaller, faster chips are in demand from mobile phone manufacturers, and customers also want faster devices with better performance.
Here's my analysis of why this company's stock can be considered a keeper.
- Favorable Earnings: Qualcomm beat industry expectations in its recently reported 3rd quarter earnings, which included a 35 percent increase in revenue growth. Total revenue was $6.24 billion, higher than the estimated $6.03 billion.
- Interest in chips: People want better coverage, and they want phones that deliver good performance. The 3rd quarter financials showed that chip shipments are up 22 percent from last year. The chip division brought in 47 percent more revenue than past quarters, and there's hope for the Snapdragon, a type of chip that offers 3G and 4G coverage.
- New tech: Qualcomm continues to develop ways to improve chip performance. In February 2013, Qualcomm announced the RF360, a 'brain' for mobile devices that can send and receive signals. It's small, powerful and can handle all seven cellular modes, which is why The Street called it a 'game changer.'
- Hopes for Apple: Qualcomm chips power iPhones, which generally are reliable products. Experts expect Apple to release the iPhone 5 fall 2013 - if the debut follows past devices there will be significant interest from Apple enthusiasts, followed by others, people who may have been unsure about earlier versions.
- Leadership: Qualcomm's Chief Marketing Officer Anand Chandrasekher is ready to get the word out to the public about Qualcomm's value to the industry. He previously spent 25 years at Intel, including its mobile division, so is familiar with public perception. In a recent CNN interview, he discusses the value of strategic partnerships.
- New products: Companies must offer everything from desktops and laptops to tablets. The newest product will be wearables -- smart glasses or personal devices that attach to clothing. This could open new markets and avoid the possible over-saturation of the phone/tablet market. Customers who may resist upgrading just because a new phone or tablet comes out may reconsider if there is something innovative like spectacles.
Though the outlook for Qualcomm is generally encouraging, there are certainly some areas of concern and possible challenges ahead.
- Apple labor. Though there will be Apple fans who buy anything new, industry watchers say Apple has become much less innovative in the post-Jobs era. Even worse, the production of what is expected to be the iPhone 5 has already been dogged by reports of labor abuses in Taiwan. Information Week reported in late July that a labor rights organization alleges legal and ethical violations at Pegatron, a supplier. This isn't the first time that Asian contractors have been accused of Apple labor violations. While Qualcomm isn't directly involved with Apple suppliers, it would be affected by a strong reaction from the marketplace.
- Wireless loss: The 3rd quarter earnings were positive, with increases in licensing and chip divisions. But the wireless and Internet divisions showed a 1 percent loss, which worked out to $16 million. A growing number of tech experts say the PC market is getting softer than ever while mobile grows.
- Competition: Intel previously had been focusing on developing ultra-thin laptops and fewer resources into mobile devices. However, Fortune recently reported that Intel's new CEO has begun to regain lost footing with smartphones, and also speeding up production of the Atom chip line for tablets and phones. Nvidia also is in game development, an area Qualcomm hasn't explored.
- Familiarity: Intel has memorable commercials and a partnership with Microsoft, but other chip manufactures are less familiar. Interbrand's list of the Best Global Brands for 2012 showed high placement for Samsung, Nokia and Intel, plus Microsoft, Apple, Google and Cisco. BlackBerry ranked 93, but Qualcomm didn't appear at all.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.