Qualcomm Earnings Preview: What We’re Watching

Qualcomm (NASDAQ:QCOM) is expected to announce its fiscal year Q3 earnings on July 20th. During the last quarter, competition has heated up as the demand for smartphones and tablets continues to grow. In Qualcomm’s results, we will gauge how its competitive position in this market has changed in recent months compared to competitors like Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:BRCM), Marvell (NASDAQ:MRVL), Infineon (now acquired by Intel (NASDAQ:INTC)) and Texas Instruments (NYSE:TXN) in the mobile phone and tablets chispet markets.

Our $57 price estimate for Qualcomm stock implies slight upside from the market price.

Competition Increasing for Qualcomm

Qualcomm holds patents in CDMA, WCDMA, OFDMA technology and is the leader in the baseband chipset market based on this technology with a market share of around 65% as of 2010. However, competition continues to increase for Qualcomm and last quarter Nvidia gained market share with new announcements.

Nvidia’s Tegra 2 mobile processor has gained traction with several mobile devices manufacturers like Motorola Mobility (NYSE:MMI), Acer, LG and Samsung that have adopted Tegra 2 (see Nvidia’s Tegra 2 Chips Gain Traction). Additionally, Nvidia acquired Icera in the past quarter which will give it a chance to strengthen its position in the chipset market (see Nvidia Acquires Icera as Baseband Chipset Market Heats Up).

According to a recent Strategy Analytics report, the baseband chipset market showed strong growth in Q1 2011. Qualcomm ranked first in this market in terms of volumes and revenue though Intel and Spreadtrum continue to show impressive growth, which could pose a threat to Qualcomm longer term. ^[1] We will watch how this increasing competition is impacting Qualcomm’s market share and margin outlook in the pending earnings.

See our complete analysis for Qualcomm stock here

1. Cellular Baseband Market Reached $3.5 Billion in Q1 2011, Strategy Analytics, June 22nd, 2011 [↩]