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WIKI ANALYSIS
QUALCOMM, Inc. (NASDAQ: QCOM) is the leading manufacturer of the CDMA chip-technology that is used in 3G wireless communications. 3G networks have boomed in the past five years, with 3G subscriptions growing 33% to 705 million,[1] and this has translated to QCOM more than doubling its sales since 2004.[1] The company has made and marketed a CDMA module named the "Gobi" that will be installed in high quality PCs from companies including Dell (DELL) and HP, and has seen so much success from its CDMA technology that its competitors have attempted to replicate it. In particular, the company has had legal disputes with Nokia (NOK) and Broadcom (BRCM) within the past two years. QCOM may be number one in CDMA modules, but wireless networking has become more competitive since Apple's IPhone supports GSM technology -- CDMA's rival in 3G networking. Furthermore, 4G networking has been in development within the past year. With 70% of its sales coming from Asia,[2]
Business Overview
Business & Financial Metrics[3]
In 2009, Qualcomm generated a net income of $1.59 billion on revenues of $10.42 billion. This represents a 49.6% decrease in net income and a 6.5% decrease in revenues from 2008, when the company earned $3.16 billion on $11.14 billion in revenues.
Business Segments[4]
Qualcomm operates in four segments.
Qualcomm CDMA Technologies (QCT) (58.9% of total revenue)[5]
QCT is the number one developer and supplier of CDMA-based integrated circuits and system software for wireless voice and data communications, multimedia functions and global positioning system products. QCT’s integrated circuit products and system software are used in wireless devices, particularly mobile phones, data cards and infrastructure equipment.[5]
Qualcomm Technology Licensing (QTL) (34.6% of total revenue)[5]
QTL grants licenses to use portions of Qualcomm's intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products, including, without limitation, products implementing cdmaOne, CDMA2000, WCDMA , CDMA TDD, GPRS/EDGE and/or OFDMA standards and their derivatives. QTL receives revenue from license fees as well as ongoing royalties based on worldwide sales by licensees of products incorporating or using Qualcomm owned intellectual property. License fees are fixed amounts paid in one or more installments. Ongoing royalties are generally based upon a percentage of the wholesale selling price of licensing products, net of certain permissible deductions (e.g. certain shipping costs, packing costs, VAT, etc.). Qualcomm reports that the vast majority of this segment's revenues are generated primarily through licensees’ sales of cdmaOne, CDMA2000 and WCDMA products.[5]
Qualcomm Wireless & Internet (QWI) (6.2% of total revenue)[5]
QWI, which includes Qualcomm Enterprise Services (QES) (formerly Qualcomm Wireless Business Solutions, or QWBS), Qualcomm Internet Services (QIS) and Qualcomm Government Technologies (QGOV), generates revenues primarily through mobile communication products and services, software and software development aimed at support and delivery of wireless applications.[5]
Qualcomm Strategic Initiatives (QSI) (0.3% of total revenue)[5]
QSI manages the Company’s strategic investment activities, including MediaFLO USA, Inc. (MediaFLO USA), the Company’s wholly-owned wireless multimedia operator subsidiary. QSI also makes strategic investments to promote the worldwide adoption of CDMA-based products and services. Qualcomm's current strategy is to invest in CDMA-based operators, licensed device manufacturers and start-up companies that are believed open new markets for CDMA technology, support the design and introduction of new CDMA-based products or possess unique capabilities or technology.[5]
Nonreportable Segments
Nonreportable segments include: the Qualcomm MEMS Technologies division, which is developing an IMOD display technology based on micro-electro-mechanical-system (MEMS) structure combined with thin film optics; the Qualcomm Flarion Technologies division, which is developing OFDM/OFDMA technologies; the MediaFLO Technologies division, which is developing our MediaFLO MDS and FLO technology and markets MediaFLO for deployment outside of the United States; and other product initiatives.
Trends and Forces
Qualcomm Snapdragon
Snapdragon is an ARM architecture platform developed by Qualcomm for powering mobile computing devices. It is designed for real time ubiquitous computing with low power consumption for day-long battery life. The first releases of Snapdragon are the QSD8650 and the QSD8250, available since 4Q2008, both integrating a 1GHz AP and including cellular modem and GPS.The latest QSD8672 chip uses 45 nm technology and includes two CPU cores running at up to 1.5GHz. QSD8672 product targets advanced mobile computing devices and includes integrated HSPA+, GPS, Bluetooth, high definition video recording and playback, Wi-Fi and mobile TV technologies (MediaFLO, DVB-H and ISDB-T). The first mobile internet device to use Snapdragon rated at 1GHz is Toshiba's TG01 smartphone.
Snapdragon's power and integration are the key selling points. Qualcomm--because of its background in the cell phone market where integration and low-power are the name of the game--has packed a lot of features onto one piece of silicon that is short on power consumption and long on battery life. Another salient point: Qualcomm isn't licensing the technology from ARM in the traditional sense. The company has licensed the instruction set only and then built its own processor, allowing it to boost the clock speed to 1GHz and beyond while keeping the power low. Snapdragon, however, is not a speed demon. It will offer relatively good performance within the targeted power envelope.Snapdragon operates below 0.5 watts, is based on the newest ARM v7 instruction set, runs as fast as 1GHz, and integrates almost everything including the processor, GPS, an ATI graphics core, multimedia (digital signal processor), and 3G modem, all on one 15mm X 15mm piece of silicon
Competition
Telecommunications
- QUALCOMM (QCOM) -- QCOM develops and manufactures wireless software and semiconductors for the cell phone industry. It is the largest patent-holder of CDMA (cellular) technologies.
- Motorola (MOT) -- Like Nokia, MOT is a handset manufacturer that attempts to develop its own CDMA technology.[6]
- Nokia (NOK) -- NOK owns 40% of the handset market,[7] and uses Qualcomm's CDMA technology in its phones. NOK and QCOM have had legal disputes over QCOM's prized patent, however.[8] Like MOT, Nokia attempts to create its own CDMA technology.
- Broadcom (BRCM) -- BRCM manufactures similar semiconductor products for wireless communications, especially 3G networking.[9]
- Alcatel (ALU) -- ALU competes with QCOM in developing CDMA technology.[10]
References
- ↑ 1.0 1.1 QCOM 2008 10-k, Item 6: Selected Financial Data, page 42
- ↑ QCOM 2008 10-k, Item 1A: Risk Factors, page 18
- ↑ QCOM 2009 10-K pg. 41
- ↑ QCOM 2009 10-K pg. F-29
- ↑ 5.0 5.1 5.2 5.3 5.4 5.5 5.6 5.7 QCOM 2008 10-k, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 52
- ↑ #128 MOT 2007 10-k, Item 6: Selected Financial Data, page 34
- ↑ Engadget.com, "Nokia grabs 40% of global handset market, nets $2.6 billion in Q4"
- ↑ NOK 2007 20-f, Item 3A: Selected Financial Data, page 7
- ↑ 2007 Broadcom Annual Report
- ↑ ALU 2007 Annual Report
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