Most of the “must-have” tech names are overhyped, overbought, or underperforming—except this one, notes Elliott Gue of Personal Finance.

With a market capitalization of over $100 billion and $25.6 billion in cash on its balance sheet, Qualcomm (QCOM) is the seventh-largest technology company in the US. The company’s business consists of two major operating segments, Qualcomm CDMA Technologies (QCT) and Qualcomm Technology Licensing (QTL).

The former designs and sells chipsets that are incorporated into a wide variety of electronic devices, from PCs to smartphones and tablets. For example, the company’s Snapdragon family of processors aimed at the mobile market offer broadband connectivity, processing capability, audio, and video, all with ultra-low power consumption.

The QTL division owns a long list of patents covering third-generation (3G) and fourth-generation (4G) mobile-communications technologies. This intellectual property means that every time a smartphone manufacturer sells a handset that allows for high-speed data connections, Qualcomm collects a royalty on the sale. Qualcomm earns the fee regardless of whether the handset is an iPhone, Blackberry, or any other type of device.

In mid-July, Qualcomm reported in-line quarterly results, driven by the licensing division, where device sales by companies licensing its technologies increased to $47.8 billion, up 31% year over year and above the high end of its prior guidance range.

Because the company earns royalties based on the selling price of devices, the sales mix is just as important as the number of devices sold. In the most recent quarter, the company benefited from a particularly strong mix of high-end smartphone sales, which boosted average selling prices to between $226 and $232 per device, an increase of about $15 compared to the previous quarter.

Qualcomm’s QCT division shipped 141 million mobile integrated circuits in the quarter, up 18% from a year ago but below expectations. However, this shortfall actually reflects strong demand rather than any end-market weakness.

Manufacturing supply constraints for Qualcomm’s most advanced 28-nanometer chips prevented the company from meeting demand. Moreover, some manufacturers have reduced their inventories of chips because they plan to launch a new range of products in time for the year-end holiday season.

We expect QCT’s sales to resurge in late 2012 and early 2013, as supply constraints ease and a host of new models featuring Qualcomm’s Snapdragon technology are released.

Qualcomm is a dominant technology franchise trading around 15% off its March highs, offering investors an opportunity to snap up shares at an attractive price. Buy Qualcomm up to $70.

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