Intel Corporation (INTC), QUALCOMM, Inc. (QCOM): Why This Chip Manufacturer’s Revenue Will Keep Growing

QUALCOMM, Inc. (NASDAQ:QCOM)’s current size is, as a matter of fact, quite optimal, because a smaller size can also become a disadvantage, especially in the competitive market of mobile chips, where Broadcom Corporation (NASDAQ:BRCM) (only one seventh of Qualcomm’s current market capitalization) is finding it hard to compete against Qualcomm. Notice also that Broadcom was a supplier to Nokia for some of its models and the Nokia shift from Symbian to Windows Mobile will likely decrease sales. In this sense, Qualcomm and Broadcom are both too dependent on a few key customers.

My take

I see more reasons to be a bull.

Sure, increasing competition due to a catch-up in the mobile arena coming from Intel Corporation (NASDAQ:INTC) and the strong R&D budget of Broadcom Corporation (NASDAQ:BRCM) are risks that need to be understood carefully before making an investment decision, especially when there are signals that the smartphone market is on its way to saturation. The company is also quite cyclical and has too much exposure to Samsung’s performance.

But there are far more upsides here. First, despite increasing competition, QUALCOMM, Inc. (NASDAQ:QCOM) has showed investors that it can continue growing its revenue and beat the Street consensus. Although highly cyclical, the current royalties Qualcomm gets because mobile-phones have to function on a CDMA-based networks add safety to the cash flow. And to make things better, a growing dividend and aggressive repurchases are set to help, artificially, increase EPS.

Adrian Campos has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Qualcomm.

The article Why This Chip Manufacturer’s Revenue Will Keep Growing originally appeared on Fool.com.

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