Will Qualcomm's Struggles End in 2016?

Despite being in red previous year, Qualcomm (QCOM) is off to a decent start this year. In 2015, the company was badly hurt mainly due to elimination of its Snapdragon 810 processor from Samsung’s flagship smartphones, as Samsung holds a leading position in the smartphone segment. Safe to say, 2015 was not a good year for Qualcomm investors, however things can change this year.

Qualcomm is about to launch its new Snapdragon 820 processor, a next version of Snapdragon 810 processor, and has fixed all the issues that were found in Snapdragon 810 processor such as overheating.
It seems like the company has learned from its mistakes and is ready to move higher.

On the other hand, the company has three fundamental strong points. First, Qualcomm assimilates its ARM-based processors, modems, and Adreno GPUs into single System-on-a-Chip, or SoC, which amplifies its chip manufacturing business’ trench against rivals in every category.

Second, Qualcomm’s wireless modems and application processors have a “best in class” reputation, which allows the company to score even more design wins.

Third, the company’s 3G or 4G patent licensing business involves a $3 or $4 cut of the wholesale price of maximum mobiles sold throughout the world.

As of late, Qualcomm’s QCT business has been losing its market share to its rival Media Tek, as Media Tek supplies modems at comparatively lower price. In the case of QCT, Qualcomm’s licensing fees have been disparaged as being too high by foremost companies and regulators in its significant three markets. The company already dropped its fees in China, and is being forced to do the same in Taiwan and South Korea.

In spite of all the issues, Qualcomm topped the analyst estimates in terms of revenue as well as earnings in the most recent quarter, but its total sales declined around 18 percent yearly. The decline in sales was expected and already priced in the share price. Now that all the bad is in the past, I think Qualcomm may be ready to move higher.

At present, the Qualcomm’s future looks foggy, but its new licensing agreement in China, new Snapdragon processors, and its spreading out into new markets such as connected cars and data centers will definitely turn Qualcomm’s growth back in the right direction.


Qualcomm has multiple tailwinds going forward. After months of disappointment, the company may finally reward investors this year. The risk/reward ratio is favourable, making Qualcomm a good buy.
Published on Mar 28, 2016
By Akshansh Gandhi

Copyrighted 2016. Content published with author's permission.

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