Giants don’t take baby steps, and are certainly hard to knock down. Google Inc (NASDAQ:GOOG), QUALCOMM, Inc. (NASDAQ:QCOM) and Broadcom Corporation (NASDAQ:BRCM) are three established tech companies that have been outperforming their peers. With promising paths to profits ahead of them, they are interesting options for those looking for long-term investments in the sector. Let’s take a closer look at each.
A leader to look out for
Google Inc (NASDAQ:GOOG) is one of the leading tech enterprises and is the undisputed champ in Internet searches, with more than 60% of the global market share. This is an impressive figure when you take into account that no other competitor reaches 10%. Having gained around 28% during 2013, Google trades at $895, or 26 times its earnings–this represents an 11% discount to the industry average.
Google Inc (NASDAQ:GOOG)’s second quarter results, reported last week, failed to meet Wall Street’s estimates. Falling ad prices and Motorola Solutions Inc (NYSE:MSI)’s widening losses were to blame. The cost per click (CPC) of advertisements, which is a key metric for the company, experienced a year-over-year decline of 6%; this certainly had an impact on the company’s revenues, as the firm’s core source of revenue is online search advertising.
Licensed to communicate
QUALCOMM, Inc. (NASDAQ:QCOM) is a major player in the digital wireless telecommunications market. Its business is primarily focused on selling wireless chips and licensing technology. The company’s developments in CDMA technology (which all 3G wireless networks use) constitute the foundation of its wide economic moat, as handset makers must pay royalties to the firm in order to make their devices function on a CDMA network.
The substantial growth of 3G wireless technologies in emerging markets such as China has been consistently benefiting QUALCOMM, Inc. (NASDAQ:QCOM)’s royalty revenues. This tendency is not expected to revert, either. In fact, according to Wireless Intelligence reports, over 1.5 billion 3G users should be added in these regions by 2015. Moreover, the demand for high-end smartphones and tablets is gradually increasing, which should benefit the company over time. The biggest risk regarding its licensing revenue is that it’s tied to handset pricing: if these fall, so will Qualcomm’s revenues.
QUALCOMM, Inc. (NASDAQ:QCOM) trades at $61 or 17 times its earnings, an almost 50% discount to the industry average. It also offers a 1.79% yield and industry-leading net and operating margins. The company is in a position to benefit over time. Despite the fact that its shares don’t appear poised to offer above-market gains soon, it looks like an interesting long-time investment.
No fish but lots of chips
Broadcom Corporation (NASDAQ:BRCM) is an American semiconductor provider. The company has experienced sustained growth since its establishment, fueled primarily by the broadband communications burst. The firm’s main strength has been innovation; with its broad product portfolio, Broadcom is now the market leader in supplying chips for some of today’s most popular technologies including mobile connectivity, set-top-boxes and media servers, and enterprise networking.
The company’s revenue has been growing continuously over the past 10 years at a compound annual growth rate (CAGR) of 22%, which is way over the industry average of 8%. The persistent growth of the wired and wireless communications markets, where Broadcom Corporation (NASDAQ:BRCM) is a key supplier of connectivity chips, offers solid growth prospects for the firm. The increasing demand for smartphones and tablets in particular should drive Broadcom’s growth.
Besides having major firms such as Apple Inc. (NASDAQ:AAPL) and SAMSUNG ELECT LTD(F) (OTCMKTS:SSNLF) as its customers, Broadcom Corporation (NASDAQ:BRCM) has been forming partnerships with handset makers in emerging markets. In China, the world’s largest smartphone market, Broadcom is working with China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) to introduce a smartphone priced below $100.
While there are encouraging long-term revenue opportunities for Broadcom Corporation (NASDAQ:BRCM), the company must invest heavily in R&D if it wants to maintain its competitive technology edge. This is due to the company facing increasingly fierce competition in the wireless market.
Currently, Broadcom Corporation (NASDAQ:BRCM) trades at 33$ or almost 24 times its earnings, representing a slight premium in comparison to the industry average. With a strong performance record and a growing customer base, however, it looks like good time to chip in.
Bottom line
While the three stocks reviewed offer tempting prospects, my bet here is with Broadcom Corporation (NASDAQ:BRCM). The firm has been performing strongly, has demonstrated notable technological proficiency, and is expected to continue to benefit from the strong demand for mobile devices and smartphones. In this aspect, the partnership with China Unicorn certainly sounds promising as it answers this demand in the large Chinese market.
Damian Illia has no position in any stocks mentioned. The Motley Fool recommends Facebook and Google. The Motley Fool owns shares of Facebook, Google, and Qualcomm.
The article 3 Tech Behemoths to Consider originally appeared on Fool.com.
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