|(Not much new here to the QCOM loyalists..but it's good to see the mainstream media/analysts starting to get our story right..)|
Sales soaring for 3G products
Smart phones are making cell phones look kinda dumb
By Kathleen Gallagher of the Journal Sentinel
Posted: May. 31, 2009 7:40 p.m.
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The Journal Sentinel focuses on one Wisconsin money manager or analyst in this weekly feature, looking at a trend that helps investment pros make their decisions.
So much for cell phones.
Smart phones like the iPhone and BlackBerry are making phones that are only used for talking nearly obsolete.
"It's all about being connected on the go," said David J. Drzadinski, portfolio manager at Red Granite Advisors LLC in Milwaukee.
Sales of smart phones rose 45% in 2008 and are expected to be up as much as 14% this year, compared with a projected 5% decline in cell phone sales, Drzadinski said.
Much of what is driving the shift is the relatively new 3G, or third generation, wireless technology, which gives smart phone users high-speed data access.
A myriad of applications doesn't hurt either. Consumers can choose from 25,000 applications for everything from a "moron test" to an amateur surgeon game and a shipment-tracking tool at the Apple iTunes store, which has had more than 1 billion downloads in less than a year, Drzadinski said.
Carriers are subsidizing smart phones, often with flat fees for unlimited voice and data usage, because their average revenue per unit is 1.5 times what it is for a voice-only plan, he said.
Drzadinski holds several stocks to try to capitalize on the smart phone explosion:
Apple Inc. (AAPL, $135.81), of Cupertino, Calif., makes the iPhone, whose sales were up 123% in the first quarter, vs. a drop of 3% for its Macintosh computer units, Drzadinski said. Apple's shares have run up since fall, but he says they could reach $160.
Research In Motion Ltd. (RIM, $85.75), of Waterloo, Ontario, makes the BlackBerry phone and other wireless devices.
It used to be just Wall Street types who owned BlackBerries, but now the consumer market contributes 60% of company sales, Drzadinski said. RIM's smart phone market share could rise to 18% this year, powered partly by a "buy one get one free" deal with Verizon, he said. After a down first quarter, margins appear to have stabilized, and should recover for the second quarter, he said.
Qualcomm Inc. (QCOM, $43.59), of San Diego, Calif., develops wireless communications products and services. Its shares have traded as high as $56.88 and as low as $28.16 in the last 52 weeks.
A sort of research-and-development lab for wireless products, Qualcomm is particularly well-positioned to benefit from the smart phone explosion, which should spread fairly quickly to countries like China and India that are starting to adopt 3G technology, Drzadinski said.
Not only does Qualcomm get royalties from a technology some cell phones use to transmit data, it gets royalties whenever devices use 3G technology – which is essential for smart phones, he said.
A 4G technology will likely surface in the next three or four years, but Qualcomm is working on patents for that, too, Drzadinski said.
Qualcomm also has an opportunity to get business from Motorola, and it has settled legal tussles with Nokia and Broadcom, so it can better focus on the business, Drzadinski said.
Qualcomm's stock looks attractive with a reasonable valuation, and could go as high as $60 a share in the next 12 months, he said.