What's eating Qualcomm Inc.?

 

What's Eating Qualcomm Inc.?
At first blush, you might answer: What isn't? Its closest ally, Verizon Wireless, has just inked a deal with its litigious arch-nemesis Broadcom. The EU has more or less written off its MediaFLO technology by choosing DVB-H for mobile TV in Europe. And President Bush is mum on whether he will veto the ITC decision to ban its chips from importation into the U.S.

By the end of this week, however, you'll see that this was a good one for Qualcomm, and on (nearly) all fronts.

First up: The Broadcom situation. Sure, Verizon Wireless has to pay a whopping $6 per phone to Qualcomm's rival, but Qualcomm still gets to supply its chipsets to the carrier. Plus, the limits imposed on the deal make for a far sweeter accord than Qualcomm could have inked with Broadcom. As we mentioned earlier this week, Verizon Wireless president and CEO Lowell McAdam told analysts that he was looking for "opportunities to mitigate" the costs with "involved parties." A colleague of mine quipped that means passing the buck to Verizon's subscribers, but I disagree: Qualcomm will pony up since it's a better deal than it could have gotten solo.

The decision to go with DVB-H in the EU for mobile TV did not come as a surprise to many in the industry, however, it is a significant blow to Qualcomm's hope to ink deals overseas with its FLO-based mobile TV offering. The EU, however, is now mulling whether to lift its 1987 mandate for basic GSM technology in the 900 MHz band (see the full story below), which could pave the way for Qualcomm to ramp up more deals with its next-generation wireless technologies like W-CDMA.

Back to mobile TV: Qualcomm's FLO has more or less conquered the U.S. The company has already announced deals with AT&T and Verizon Wireless for its FLO technology, and this week Crown Castle announced it was shuttering plans to roll out its Modeo mobile TV service [1]. So the big carriers and Qualcomm no longer have to worry about what little threat the independent competition posed.

What's more, a study from iSuppli found that Qualcomm has surpassed Texas Instruments as the world's leading supplier for integrated circuits for mobile devices thanks to strong growth in EVDO (full story below).

Of course, there's still that veto, which would be precedent-setting and, therefore, unlikely. On top of that, the smart money is on other carriers following Verizon Wireless' lead and inking deals with Broadcom sooner rather than later. 

On balance, this week will still be a good one for Qualcomm, however, as this afternoon's third-quarter results announcement is expected to be full of strong financials and growth. -Brian [2]

P.S. There's been a lot of talk today about the iPhone "missing" its projections during Q2 for AT&T and Apple because it "only" sold 146,000 units during the first day and a half. If I recall correctly there were no projections from the companies for that time period, only outlandish ones for the opening weekend from some financial analysts: 500,000 (Piper Jaffray) or 525,000 (Global Equities Research). Hardly worth the headline.