Dish Network (NASDAQ:DISH) is investing money in a collaborative effort with Qualcomm (NASDAQ:QCOM) to build a platform that will support satellite-based communications.  The platform is Qualcomm’s Snapdragon S4 MSM896 and will be used in Dish’s wireless devices in the future when the company launches its broadband service. Interestingly, this investment and effort from Dish comes before the regulatory approval for the use of its acquired spectrum. This implies that Dish is fairly confident about the outcome, and the deployment of its wireless broadband is a likely scenario that will put it in a more competitive position against rival DirecTV (NASDAQ:DTV).
Qualcomm is a leader in mobile chipsets, and this collaboration will virtually guarantee quality performance for the devices operating on Dish Network’s wireless broadband network. This is a big task and Dish needs to make sure that it does so swiftly, without compromising on network or device quality. Investors are bound to be skeptical as Dish spends more in building out its network and, since this is a new venture, return on invested capital will be uncertain until Dish can show incremental profits.
Although the company has shown its capability in handling new business with its success with Blockbuster movie rental, wireless broadband will be a different ballgame. Not only additional capital expenditure will be at stake, Dish will have to compete with a number of established broadband giants.
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Our price estimate for Dish Network stands at $34.31, implying a premium of about 25% to the market price.Notes:
- DISH Invests in Broadband Satellite Chipset for Mobile Devices, Dish Network Press Release, June 11 2012 [↩]