Qualcomm’s Mobile TV App Drives Demand for Powerful Mobile Chips
Qualcomm (NASDAQ:QCOM) makes money by selling CDMA chipsets to mobile phone manufacturers such as Apple (NASDAQ:AAPL), Nokia (NYSE:NOK), Samsung and Motorola (NYSE:MOT), and by charging a royalty to mobile manufacturers on every phone sold.
The company also offers MediaFLO, a mobile phone TV application that allows mobile phone users to watch TV shows on their phones. Qualcomm sells MediaFLO to mobile operators like Verizon and AT&T, and earns a fee for every mobile phone using its MediaFLO application.
We estimate that the mobile TV business itself is not a significant contributor to Qualcomm’s stock. However, mobile TV can increase demand for more powerful Qualcomm mobile phone chipsets if consumer adoption of mobile TV increases meaningfully.
Mobile TV Insignificant for Qualcomm
We estimate that the mobile TV applications business constitutes less than 1% of the $42 Trefis price estimate for Qualcomm’s stock. Our estimate is based on a 2% mobile TV penetration amongst the 1.3 billion mobile phones sold in 2010 and growth of mobile TV penetration to about 8% of mobile phones sold over the Trefis forecast period.
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You can modify our forecast above to see how mobile TV would remain insignificant for Qualcomm’s stock even if mobile TV penetration were to increase to more than 50% of mobile phones sold.
Mobile TV Drives Demand for Qualcomm Chips
Although the direct contribution of the mobile TV business for Qualcomm is small, demand for mobile TV can drive sales of more powerful Qualcomm mobile phone chipsets. By encouraging adoption of mobile TV by operators, Qualcomm is seeding demand for more powerful mobile phone chipsets.
Customer demand for rich media-capable phones with mobile TV will spur mobile phone makers (Nokia, Motorola) to buy more powerful chipsets from companies like Qualcomm.
What percent of Qualcomm’s stock do you think comes from the mobile chipset business?
A. 21%
B. 43%
C. 61%
D. 78%
Make a selection above to see the answer.
For additional analysis and forecasts, here is our complete model for Qualcomm’s stock.