Qualcomm: Valuation Revisited

5/4 - "Gobi, Qualcomm’s embedded dual-standard chipset for laptops has helped the company gain traction with laptop vendors. Till date five major OEMs are embedding the mobility solution in their laptops...Qualcomm also offers the Snapdragon and the Snap Star solutions that, in my opinion, are taking on Intel’s Ultra-mobile PC (UMPC) and Mobile Internet Devices (MID) initiatives. While Intel approaches these convergence initiatives as a reduction in the form-factor and power consumption, Qualcomm has proven competency in building high-performance mobile chipsets."

"While it is difficult to quantify Qualcomm’s convergence moves, the upsides are very apparent. For the purpose of valuation, I will take a conservative stance. If I assume that Gobi succeeds in penetrating 20% notebooks in 2012, and the other solutions find slightly lesser success in their segments, I estimate at least a $5.50 increase in Qualcomm’s share price. So, my verdict, based on current information, is $50 per share."

"In summary, Qualcomm has continued to create more value with a very well-thought out and visionary product roadmap and planning into the future. These diversification efforts that I have highlighted in the past will expand the company’s core competency beyond mobile phone chipsets and IP. It also makes Qualcomm more resilient in the eventuality of reversals in some of the various legal disputes that it has been involved in. Finally and perhaps most importantly, the diversification also highlights Qualcomm’s ability to adapt to the changing market needs as it continues to be the flag-bearer for the US wireless industry."