Qualcomm: Unmatched in Wireless
07/08/2013 6:30 am EST
The growing desire for people to be connected through smartphones and digital devices provides long-term growth opportunities for this world leader in wireless technologies, says Ingrid Hendershot of Hendershot Investments.
In 1985, seven industry veterans came together in the den of Dr. Irwin Jacobs' San Diego home to discuss the idea of building "Quality Communications."
By 1989, Qualcomm (QCOM) introduced the concept that a digital communication technique called CDMA (Code Division Multiple Access) could be commercially successful in cellular wireless communications.
Indeed, CDMA was highly successful, and Qualcomm has rapidly grown to become a world-leading provider of 3G, 4G, and next-generation wireless technology and services, with revenues now topping $19 billion.
Because Qualcomm led and continues to lead the development and commercialization of CDMA technology by investing 20% of sales in research and development, they own significant intellectual property. About 35% of 2012 revenues was derived from licensing and royalty fees, including revenues from Samsung and Apple's suppliers.
In addition, Qualcomm is the world's largest fabless semiconductor producer, and the largest provider of wireless chipsets and software technology, which power the majority of all 3G devices available today.
The company's unmatched wireless innovations enable new generations of increasingly powerful smartphones, computers, tablets, and consumer electronics. The need to stay connected anywhere, anytime is driving strong demand for Qualcomm's products and services, especially for applications such as e-mail, access to the mobile Internet, downloading of videos, and social networking.
Sustained long-term growth opportunities will come from new mobile computing applications, emerging market growth, and increased data traffic.
Qualcomm's profitable operations have generated strong cash flows. Free cash flow more than doubled over the last five years, to $4.7 billion at the end of 2012.
The company returned a cumulative $20.3 billion to shareholders through dividends and share repurchases since 2003. Management recently increased the dividend 40% to an annualized rate of $1.40 per share. In addition, the company announced a new $5 billion stock repurchase program.
Long-term investors should use a wireless device to check out Qualcomm, a high-quality technology leader with outstanding financial strength and healthy growth. Buy.
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