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. Today, Qualcomm is a world leader in 3G, 4G and next-generation wireless technologies.
Indeed, CDMA was highly successful, and Qualcomm has rapidly grown to become a world-leading provider of wireless technology and services with revenues 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 (third generation) 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 email, 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. In the first half of fiscal 2013, free cash flow increased 22% to $3.7 billion. As of 3/31/13, Qualcomm's strong, debt-free balance sheet boasted more than $30 billion in cash.
This substantial sum remains even after the company returned a cumulative $20.3 billion to shareholders through dividends and share repurchases since 2003.
Given Qualcomm's outstanding financial strength and continued growth, 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.
Qualcomm reported strong fiscal second quarter results with revenues up 24% over the prior year period to $6.1 billion with income from continuing operations up 30% to $1.9 billion.
With strong traction from new Qualcomm Snapdragon 600 and 800 processors and healthy growth in 3G and 3G/4G multimode devices around the world, management raised their revenue and earnings estimates for fiscal 2013.
Revenues are expected to increase 26%-31% to a range of $24 billion to $25 billion, generating EPS between $3.78-$3.93.
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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