4G Technology on Gobi Chipsets Can Benefit Qualcomm’s Stock

Qualcomm’s (NASDAQ:QCOM) stock depends on sales of chipsets used in mobile phones and notebooks.  We estimate that about 43% of Qualcomm’s stock is attributable to the company’s chipset business.  In comparison, about 30% of Qualcomm’s stock value comes from mobile phone royalties and the company’s large cash balance constitutes slightly over 25% of the stock.

Qualcomm recently announced a new product roadmap that includes adding 4G technology to its Gobi chipsets.  By incorporating 4G technology in Gobi, Qualcomm’s chipsets will appeal to a wider range of device makers, which could lead to an upside of 1% to the $42 Trefis price estimate for Qualcomm’s stock if the company’s chipset market share were to increase more than we forecast.

Gobi is for Notebooks, Netbooks and Tablet PCs

Gobi chipsets are the embedded wireless modems used in many notebooks, netbooks and tablet PCs.  The chipsets provide internet access without the need for a Wi-fi connection and make it easier for device users to access mobile internet.

Gobi Still a Small Part of Qualcomm’s Chipset Revenue

We expect Qualcomm’s notebook chipset revenue to remain a small component of overall chipsets revenue for Qualcomm.  We currently forecast Qualcomm’s notebook chipset business will earn about $800 million revenue by the end of our forecast period compared to $12 billion of revenue earned by Qualcomm’s mobile phone chipsets business.

The difference is due to the large addressable market of mobile phones compared to notebooks, and the large market share of Qualcomm in mobile chipsets compared to notebook chipsets.

Opportunity to Increase Qualcomm’s Notebook Chipset Share

We believe that new 4G-enabled Gobi chispets will appeal to a wider range of notebook, netbook and tablet PC makers and that could lead to an improvement in Qualcomm’s chipset market share.

Qualcomm had less than 3% market share in the notebook chipsets market in 2009 and we expect it to increase to around 10% by the end of Trefis forecast period.

Two reasons why Gobi chipsets will help Qualcomm continue to gain share in notebook chipset market:

1.  Qualcomm’s increasing partnership with PC vendors

Qualcomm already partners with Sony, Acer, Panasonic, Hewlett-Packard and Dell in the PC space to provide Gobi chipsets. This list, however, is growing with Lenovo recently becoming a Qualcomm partner.  Some Lenovo’s Thinkpad laptops now include Gobi chipsets.

2.  Wi-fi independence addresses the user’s need for greater mobility

The Gobi chipset helps to satisfy end user needs for greater internet mobility by providing users with high speed wireless data capabilities for laptops over both GSM and CDMA networks.  This reduces the need for access to Wi-fi for mobile internet connectivity.

1% Upside to Qualcomm’s Stock if Notebook Chipset Market Share Increases at a Faster Rate

Although we forecast that Qualcomm’s share in the notebook chipset market will increase to around 10%, there could be an upside of about 40 cents (1%) to the $42 Trefis Price estimate for Qualcomm’s stock if the company’s market share were to increase at a faster rate to reach 13% by the end of Trefis forecast period.

You can modify our forecast for Qualcomm notebook chipset market share above to see how Qualcomm’s stock could be impacted in different scenarios.

For additional analysis and forecasts, here is our complete model for Qualcomm’s stock.