The mobile revolution is still going strong, even if smartphones sales are slowing down in developed countries, emerging markets like China, India and Brazil still offer plenty of room for further expansion. If that weren´t enough, tablets are still a high-growth category that will continue creating many opportunities in the middle term.
But the competition among device manufacturers is getting tougher by the day, and companies are seeing their margins squeezed due to lower priced products entering the race. QUALCOMM, Inc. (NASDAQ:QCOM) on the other hand, looks exceptionally well positioned to continue benefiting from the mobile boom for years to come by being a supplier of chips and technologies to the dominant players in the industry.
In the right place
Apple Inc. (NASDAQ:AAPL) is experiencing a clear slowdown in iPhone growth due to a combination of market saturation in the US and growing competition from Samsung and other low cost manufacturers in emerging markets. But that shouldn`t be a reason for concern for QUALCOMM, Inc. (NASDAQ:QCOM) investors: the company supplies both the high-end player with a dominant position in the U.S., which is Apple Inc. (NASDAQ:AAPL), and it also sells to competitors like Samsung and HTC that have been expanding rapidly in emerging markets.
When it comes to tablets, the iPad is still performing strongly; Apple Inc. (NASDAQ:AAPL) reported a 65% unit increase for the March quarter versus the same quarter last year, which means growing sales for Qualcomm too. New models from Samsung will likely gain market share in the middle term though, but Qualcomm is well integrated into successful models like the Samsung Galaxy Tab and the Galaxy Note phablets.
One relevant player to watch in the tablet space is Google Inc (NASDAQ:GOOG) as the company´s Nexus 7 models have been widely acclaimed by the critics, and they sell for an aggressively low price starting at $199. Besides, the company is expected to launch the new version of Nexus 7 around July, and this should provide further impulse to the product.
Fortunately for QUALCOMM, Inc. (NASDAQ:QCOM) investors, the new version of the Nexus 7 will be replacing the Tegra 3 chips from NVIDIA Corporation (NASDAQ:NVDA) with Qualcomm´s products. According to Reuters, Qualcomm´s power efficiency has been the driving force behind the change implemented by Google Inc (NASDAQ:GOOG): “In a blow to NVIDIA, Google weighed both U.S. chipmakers’ processors but finally decided on Qualcomm’s for power reasons, one of the sources added.”
NVIDIA Corporation (NASDAQ:NVDA) has always been strong in graphics and gaming, and the company has recently unveiled its Tegra 4 products, which are reportedly quite powerful. NVDIA has been investing heavily to gain ground in mobile over the last years, but QUALCOMM, Inc. (NASDAQ:QCOM) has proven once again that it´s a step ahead of the competition when it comes to the technological quality of its products, at least judging by Google´s decision.
In case you were wondering, Qualcomm is also a supplier to other players like Microsoft Corporation (NASDAQ:MSFT) and Research In Motion Ltd (NASDAQ:BBRY), so if any of these two start gaining – or in BlackBerry´s case regaining – market share in mobile, then QUALCOMM, Inc. (NASDAQ:QCOM) would be well positioned for that scenario too.
The company may face some margin pressures as cheaper mobile devices gain market share in emerging markets; low-end chips are less profitable than high-end ones. That was probably the main driver of the post earnings sell-off that the stock suffered last week in spite of reporting better than expected sales for the last quarter and also raising its guidance.
On the other hand, QUALCOMM, Inc. (NASDAQ:QCOM) should benefit from the transition towards 4G/LTE. In the future, many smartphones and tablets will be compatible with 4 G/LTE and 3G at the same time, the transition process is still in its first stages on a global basis and products need to offer adaptability. This means that Qualcomm will continue making money from its 3G and its 4G/LTE patents for quite some time.
The company has delivered growing sales and earnings through the ups and downs of the business cycle, and it has a rock solid track record when it comes to regularly increasing dividends and implementing share buybacks.
Qualcomm gave a big boost to its capital distribution program back in March, when it a announced a 40% increase in dividend payments, bringing the annual dividend payout to $1.40 per share which means a dividend yield of around 2.3% at current prices.
The company also launched a new repurchase program, QUALCOMM, Inc. (NASDAQ:QCOM) can repurchase up to $5 billion in stock under the new program, this replaces the prior one that was for $4 billion and had $2.5 billion of repurchasing authorization remaining.
The mobile revolution has plenty of room for growth considering the opportunities in emerging markets and in product categories like tablets. Because of its superior technology, rock solid competitive position and outstanding financial performance, Qualcomm is a smart bet on the mobile computing boom.
The article The Smart Way To Bet on Mobile originally appeared on Fool.com and is written by Andrés Cardenal.
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