QUALCOMM, Inc. (QCOM), Broadcom Corporation (BRCM) & Texas Instruments Incorporated (TXN): Smartphone Decline Be Darned

The recent headwinds include the Financial Times reporting that Samsung reiterated a cautious outlook for the smartphone market, reporting that Samsung is forecasting flat smartphone sales in the second quarter, which is in line with chief rival Apple’s recent warning. However, first-quarter numbers for Samsung came in pretty stellar, with the company shipping 70 million smartphones during that quarter, growing 60% from the year ago quarter.

What’s more is that during the first quarter of fiscal 2013, QUALCOMM, Inc. (NASDAQ:QCOM) shipped 182 million MSM chipsets, up 17% year over year. This figure was far better than the company’s guidance of a mid-point of 173 million. Qualcomm also reiterated its full-year revenue between $24 billion and $25 billion, which is up from its prior forecast of between $23.4 billion and $24.4 billion.

Even with the recent poor guidance by the likes of Samsung and Apple, Gartner expects the tablet and smartphone market sales to grow 9% in 2013. This, thanks in part to the fact that smartphones are becoming more affordable, is being driven by adoption in emerging markets and the prepaid segment in mature markets.

Of the 1.875 billion mobile phones expected to be sold in 2013, one billion units are forecast to be smartphones, compared with 675 million smartphone units in 2012.

Qualcomm’s chips are not only in the higher-end smartphone devices, but also the cheaper handsets that are popular throughout Asia and developing nations.

Although smartphone shipments might be slowing, the growth is still robust. The global smartphone market is likely to expand 27% this year, according to IDC.

For Broadcom’s first-quarter results, it posted EPS of $0.33, compared to $0.15 for the same quarter last year. The year-over-year increase in earnings was primarily driven by a better-than-expected performance by wireless baseband and connectivity chips. However, I still like QUALCOMM, Inc. (NASDAQ:QCOM) for its greater exposure to the mobile industry.

Another major chipmaker is Texas Instruments Incorporated (NASDAQ:TXN) , which designs and makes semiconductors and sells them to electronics designers and manufacturers globally. The company’s guidance for the second quarter includes revenue estimates of $2.93 billion to $3.17 billion, which is down 5.7% sequentially at the mid-point. Most notably, its legacy wireless products are expected to decline by around $60 million, or 30% sequentially next quarter.

Texas Instruments Incorporated (NASDAQ:TXN) also expects to continue spending aggressively on research and development to help the company enter higher-margin and higher-growth markets, which include gaining more exposure to industrial and automotive markets. The last few years have also seen other analog companies, such as Linear Technology and Maxim increasing focus on these areas, and they generate higher margins.

The other headwinds for Texas Instruments Incorporated (NASDAQ:TXN) is the apparent decline in the PC market. Much like its top peers, Intel and AMD, caution is suggested for Texas Instruments Incorporated (NASDAQ:TXN), given end-user concerns related to a slow economy.

QUALCOMM, Inc. (QCOM), Broadcom Corporation (BRCM) & Texas Instruments Incorporated (TXN): Smartphone Decline Be Darned

Published on May 8, 2013 at 9:56 am by The Motley Fool in News

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