Qualcomm Inc. (QCOM) today declared that its chipset inventory level is lower than usual contradicting its prior announcement that the CDMA mobile phone chipset giant is witnessing an inventory glut during the fourth quarter of calendar year 2010 (the first quarter of fiscal 2011 for the company).
This announcement diminishes investors' concern about overstocking of chips by smartphone developers and also indicates that Qualcomm can sell more chipsets during the upcoming holiday season.
Qualcomm reaffirmed its previously given future financial outlook. First quarter of fiscal 2011 revenue will be within the range of $3.05 billion - $3.35 billion. Pro Forma EPS will be within the range of 63 cents - 67 cents, excluding 7 cents per share of stock-based compensation expenditures.
Fiscal 2011 revenue will be within the range of $12.4 billion - $13 billion. Pro Forma EPS will be within the range of $2.30 - $2.44, excluding 32 cents per share of stock-based compensation expenditures.
More importantly, the company is now firmly expecting that it will be able to raise its revenue and EPS by at least 10% for the next five years. This positive momentum is mainly due to the unprecedented surge in global demand for 3G smartphones.
Several industry sources have predicted that the smartphone shipment as a percentage of total mobile phone shipment will increase from 15% in 2009 to 45% by 2014.
Qualcomm benefits from the growing popularity of Android-based 3G smartphones. Android operating system was developed by Google Inc. (GOOG) and for proper functioning requires more complex and expensive processors. Qualcomm's next-generation Snapdragon processors are generally used in Android-powered 3G smartphones.
Qualcomm now provides chipsets for 77% of a total 57 Android-based smartphones currently available. Snapdragon platform supports a wide range of operating systems including Windows Mobile 7 of Microsoft Corp. (MSFT) and Symbian of Nokia Corp. (NOK). The company provides chipsets for all 9 Windows Mobile 7 based smartphones.
A major near-term catalyst for Qualcomm is the expected launch of CDMA iPhone. Apple Inc. (AAPL) is likely to introduce its first CDMA iPhone 4 with Verizon Wireless (VZ) by end 2010/early 2011. Qualcomm is the main chipset supplier for CDMA iPhone 4.
Several industry sources have also predicted that Apple may also use Qualcomm's dual-mode CDMA/WCDMA chipset for its upcoming iPhone 5. Using Qualcomm's chipset will enable iPhone 5 to become operational on every U.S. and European wireless networks.
Emerging super-fast 4G Long Term Evolution (LTE) technologies have become another boost for Qualcomm. The growing acceptance of LTE technology has prompted the mobile handset manufacturers to develop phones that will be compatible with this network. U.S. has already tasted the LTE flavor from MetroPCS Communications Inc. (PCS) and is likely to see aggressive installation once Verizon wireless starts deploying the LTE network from end 2010.
AT&T (T) is also likely to follow suit by mid-2011. Qualcomm announced that industry's first LTE handset based on its multi-mode 3G/4G MDM9600 chipset will be launched commercially in the ensuing quarter.
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