Qualcomm Erases Fears of a Smartphone Slowdown

By Michael Comeau  NOV 03, 2011 10:00 AM

Qualcomm delivered stellar earnings results, erasing fears of a slowdown in industry growth.


Taiwan's HTC gave smartphone bulls a scare on Monday after it said that revenues and shipments in the normally seasonably-strong fourth quarter would actually be lower than that of the third.

But have no fear -- chipmaker and mobile-device bellwether Qualcomm (QCOM) delivered a solid fiscal fourth-quarter earnings report and dynamite forward guidance yesterday, erasing concerns about a smartphone slowdown.

Let's have a look at the headline facts and figures:
The key here is that fiscal-2012 guidance. I've been a huge smartphone bull and my money has been where my mouth is, with my holdings in Apple and Sandisk (SNDK).

Nonetheless, I've been a bit worried about the industry's ability to sustain its recent blistering growth rates  -- nothing grows in the 70-80% range forever.

The reality is that we have seen a bit of a slowdown in smartphone demand. The market-research firm Canalys reported smartphone unit growth of 44% in the third quarter, down from 73% in the second quarter. However, the aforementioned iPhone 4S -- incidentally a key consumer of Qualcomm parts -- should boost fourth-quarter shipments nicely.

Plus, Qualcomm's strong guidance should be reassuring to investors across the complex, which brings me to my favorite part of any earnings recap, which is...

Pin Action!

Obviously, Qualcomm's big numbers should be considered very bullish for Apple, and other smartphone plays like Silicon Motion (SIMO), and the aforementioned Sandisk. In particular, it could drive near-term upside in ARM Holdings (ARMH), though I'll admit I'm torn on that particular name.

One thing to keep in mind: Due to uncertainty following the death of famed former Apple CEO Steve Jobs, Qualcomm may actually be the best play on the fast-selling iPhone 4S though year-end.

And the conclusion...

If I were long Qualcomm, I wouldn't dream of selling. In fact, I'm strongly considering going along for the ride.

Position in AAPL, SNDK

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