Qualcomm Inc (QCOM) is all set to start selling chipsets for smart-books from the next quarter onward. The company is the largest developer of digital mobile chipsets based on CDMA wireless technology.

This new venture into the smart-book market will be a vertical diversification for the company. A smart-book is a pocket digital assistant (PDA) that functions like a mobile phone but resembles a small-size notebook with full keyboards. The chipset market for computer is primarily dominated by Intel Inc (INTC). Advanced Micro Devices Inc (AMD) and Texas Instruments Inc (TXN) are other major players.

Qualcomm has developed smart-book chipsets based on its state-of-the-art Snapdragon platform technology. A path-breaking initiative of the company is the convergence of mobile computing with the next-generation Snapdragon platform. These chipsets have been designed for pocket-sized portable computing devices.

Using Snapdragon chipsets, the consumers will no longer be required to carry battery chargers together with their laptops. These powerful chipsets will run the computer 24 hours with just one battery charge while receiving data throughout the day.

As of now, over 15 mobile device manufacturers are developing more than 30 Snapdragon-based products. Acer Inc, Samsung Electronics Co. Ltd., and LG Electronics Inc are the notable computer makers that have signed to use Snapdragon chipsets. Toshiba has already introduced its TG01 smart-phone using the Snapdragon chipset. Several leading software developers have started writing applications for mobile operating system, multimedia player, social networking, and productivity development tools based on the Snapdragon platform.

We believe diversification into mobile computing market was necessary for Qualcomm due to lukewarm growth of the company’s core mobile phone chipset market. According to various industry findings, the demand for ordinary mobile phones is likely to be reduced by 15% -20% in 2009 compared to 2008. Massive growth of smart-phones will be unable to make up for these losses.

Qualcomm’s mobile phone chipset sale is likely to decline by 5%-6% in 2009, the company's first decline since 2001. Therefore, opening up alternative revenue sources is essential for the company. According to our assessment, Qualcomm is best positioned in the industry to diversify into converged mobile computing with its gigantic balance sheet of $15.7 billion in net cash and its portfolio of superior technologies.