These devices should be accretive to the bottom line by 2010 and could see more growth than handsets over the next few years as they further penetrate the market as demand increases. The first snapdragon based devices were announced this past quarter (Toshiba TG01 smartphone) and should ship commercially this summer. Gobi is also available for commercial shipping and already has nine original equipment manufacturers (OEMs) supporting the platform on 40 notebook models. QCOM has other emerging technologies such as mobile TV called MediaFLO, a mobile commerce platform named FireThorn and eZone, a universal wireless charging technology that can simultaneously charge multiple electronic devices.

Financial Analysis/Conclusion

To sum up, QUALCOMM not only has favorable macro trends, but it’s also a fundamentally sound company. They have a strong balance sheet with a diverse revenue breakdown (shown below). Last quarter, QCOM reported strong cash flow once again, increasing $300 million year-over-year to $1.3 billion. Also, out of all non-financial companies in the S&P 500, QCOM ranks among the highest in percentiles for 2008 in return on invested capital (ROIC), return on assets (ROA) and operating margin (shown below).

• ROIC - 95% percentile
• ROA - 86% percentile
• Operating Margin - 90% percentile

Revenue Breakdown:

• South Korea = 35%
• China = 21%
• Other global = 21%
• Japan = 14%
• United States = 9%

Disclosure: The fund the author is associated with is long VZ and has interests in QCOM. The author’s family is also long VZ.