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Qualcomm Erases Fears of a Smartphone Slowdown

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

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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:
  • Revenues rose 39% to $4.12 billion, surpassing the consensus of $4 billion
  • Earnings came in at $0.80 a share, beating analysts' expectations by $0.02
  • For its fiscal-first quarter (ending in December), Qualcomm expects to earn $0.86 to $0.92 a share versus consensus of 85 cents
  • Revenues are expected to be in the range of $4.35 to $4.75 billion, nicely ahead of the $4.25 billion consensus
  • Fiscal 2012 earnings guidance is set at $3.42 to $3.62 a share, the midpoint of which is slightly ahead of expectations
  • Fiscal 2012 revenue guidance of $18 to $19 billion is well above Wall Street's forecasts
  • Qualcomm is seeing serious momentum in 3G/4G smartphones, including Apple's (AAPL) iPhone 4S
  • The company is seeing a mix-shift towards higher-end products like its Snapdragon chipset
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.

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Position in AAPL, SNDK
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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