Tuesday, February 15, 2011

Qualcomm (NASDAQ:QCOM) About to Eat Broadcom's (NASDAQ:BRCM) Lunch?

While most see the obvious benefit Qualcomm (NASDAQ:QCOM) got from the Nokia deal with Microsoft (NASDAQ:MSFT), another less-publicized deal where Samsung will be using Nvidia’s (NASDAQ:NVDA) “Tegra 2” chip for the next version of its Galaxy Tab tablet computer, will put pressure on the growth of Broadcom (NASDAQ:BRCM).

Concerning the Nokia partnership with Microsoft, JMP Securities analyst Alex Guana said, "We expect the Nokia move toward Windows to disrupt Broadcom roadmaps that, although having taken years to put into place, appear to be missing key mobile Operating System developments. From its announcement, it is clear that Nokia has an eye towards consolidating R&D expenses, which is likely to drive it towards already developed and vetted Window ecosystem partners that include Qualcomm, Nvidia, and Intel (NASDAQ:INTC) among others."

Also noted by Gauna was the introduction by Qualcomm of what it called a “mobile processing architecture," which will increase performance, integrate numbers wireless connections and lower battery consumption.

Gauna commented on the chip named "Krait", “This combo chip integration poses the most direct threat to Broadcom combo solutions and is expected to be available in early 2012.”

As for Samsung's decision to use Nvidia's chip, Broadcom is being left out of the picture there as well.

Gauna's conclusion, taking into account 47 percent of revenue generated by Broadcom comes from wireless, is that the growth rate of Broadcom will drop from 57 percent in 2010 to about 25 percent in 2011.

He sees revenue for 2011 at $7.6 billion and earnings of $2.65 a share, against the estimate of $7.83 billion and $2.78 a share the Street is looking for.

Qualcomm closed Monday at $58.17, up $0.57, or 0.99 percent. Broadcom closed at $42.93, dropping $0.70, or 1.60 percent.

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