Is There an Opportunity Around For QUALCOMM, Inc. (QCOM)?
QUALCOMM, Inc. (NASDAQ:QCOM) has been on the back foot ever since the PC market started to shrink. The chipmaker is no longer shipping as many processors as it used to, in the past. Competition has been the biggest headwind as other chipmakers make a push for its market share in the highly competitive business.
However, things are starting to look up. Intel Corporation (NASDAQ:INTC) announcing intentions to forego mobile ambitions to focus on IoT and cloud-based data centers could be a blessing in disguise for the San Francisco-based chipmaker. QUALCOMM, Inc. (NASDAQ:QCOM) stands to benefit a great deal, as its fierce rival shifts its focus to other areas of growth.
Asustek is already emerging as a savior that could reinvigorate the tech giant’s prospects in the highly competitive business. Intel killing its LTE-integrated SoFIA and Broxton processor means Qualcomm could become the chief supplier of the Taiwanese company, which is looking to bet big on smartphones.
Asustek Smartphone Ambitions
Just like another hardware giant, Asustek has felt the full wrath of a slowdown in the PC market. With sales expected drop even further, the company is planning to shift its attention to Android phones as it looks to stay afloat in the industry.
Getting more business from Asustek is exactly what QUALCOMM, Inc. (NASDAQ:QCOM) needs now. Microsoft Corporation (NASDAQ:MSFT), which was one of the company’s biggest trading partners, is not expected to release any Lumia phone this year. With talk, that the software giant is planning to exit the business altogether, the chip giant may have to look elsewhere for opportunities of growth.
Given that Asustek plans to ship up to 30 million smartphones this year should be good news for Qualcomm. There are reports that the US firm will supply 90% of the chips, which will power the upcoming ZenFone 3 Series. MediaTek is to supply the remaining 10%.
Offsetting Microsoft Big Loss
Microsoft phone business is slowly dying, its Windows OS market share having slipped below the 1% mark in the recent quarter. A deal for ZenFone 3 should be good news for shareholders who until now have been on the edge about the company’s prospects.
Given that QUALCOMM, Inc. (NASDAQ:QCOM) partnership with Microsoft is doubtful, a 3-8 million order for Snapdragon 820 from Asustek should help offset the expected loss of revenue. The deal could be worth $500 million in revenue in the first year.
The partnership could expand into tablets as Asustek is hoping to use the portable devices to offset the expected loss of revenue on the PC side. For the first three months of the year, the company shipped 1 million tablets. The rate of growth should excite Qualcomm given that it could be considered to provide chips for powering the next set of products.
The ongoing partnership does not stop with Android phones and tablets. There is a possibility that the two will could collaborate on the development of Chromebooks and Android laptops.
A growing business partnership with Asustek is exactly what the US chip giant needs as it continues to look for new opportunities for growth. Asustek increasing its investments on smartphones and tablets should make it a huge volume buyer for Snapdragon processors. The same should go a long way in bolstering QUALCOMM, Inc. (NASDAQ:QCOM)’s revenue base while offsetting any lost revenue on the Lumia brand.
QUALCOMM, Inc. (NASDAQ:QCOM) can longer rely on its licensing business if recent happenings are anything to go by. Antitrust litigations have all but thrown into doubt the prospects of the once lucrative business. With Huawei Apple Inc. (NASDAQ:AAPL) and Samsung, producing their own chips in-house relying on Asustek could be the company’s best move yet.
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