Qualcomm Atheros Inc., the newly acquired arm of Qualcomm Inc. (QCOM), recently announced a collaboration with EDIMAX Technology, a leading provider of networking solutions, to provide a new carrier-grade video-over-wireless (VoW) bridge.
This VOW solution will be supported by Atheros AR9580 chipset, which supports multi-HD video streaming across homes and is ideal for glitch-free in-home video services distribution. This modern chipset allows error-free transmission, thus offering faster streaming and high quality service at reduced cost.
Qualcomm Atheros also launched another chipset called AR7420 that provides faster, wired networking connectivity supporting up to 500 mbps of power distribution across existing household electrical wiring for consumers and service providers who offer connectivity solutions. AR7420 chipset will be available from October, 2011 onwards.
Earlier this year, Qualcomm acquired Atheros for roughly $3.3 billion, which is believed to be largest acquisition in the history of Qualcomm. The acquisition enables Qualcomm to diversify in the consumer electronics segment, particularly in the home networking market where Atheros manufactures Wi-Fi chips for televisions, video games, printers, and other home devices.
We believe that Qualcomm’s record-high earnings, strong balance sheet, accretive acquisition plans, product diversifications and solid management outlook for the current fiscal year will act as positive catalysts in the long run. Moreover, the growing popularity of smartphones and tablets coupled with increased deployment of 3G/4G networks will further drive the stock upward.
However, stiff competition from formidable rivals like Broadcom Corporation (BRCM) and Texas Instruments Inc. (TXN) as well as lower ASP of smartphones will negatively impact Qualcomm’s royalty business going forward.
We, thus, maintain our long-term Neutral recommendation on Qualcomm. Currently, Qualcomm has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
