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Shift to Mobile Continues to Put Qualcomm’s Sales in High Gear

There’s an old saying that the rich get richer.

That’s certainly true in the case of Qualcomm Inc., which has been making worldwide headlines of late due to surging sales for its prowess in building state-of-the-art smartphone chipsets.

Most recently, the Sorrento Valley-based technology giant said that it is investing $120 million in Japanese consumer manufacturer Sharp Electronics in a move to help shore up that struggling company’s balance sheet.

Qualcomm is keenly interested in Sharp’s advanced low-power liquid-crystal-display technology, which would be of benefit as the company strives to reduce the drain on mobile phone batteries as it tweaks the technology built into its processors.

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Qualcomm said it would inject another $120 million into Sharp before the end of March in order to keep the company afloat.

The decision to invest in Sharp follows closely the company’s record sales and profits for its fourth quarter 2012, 18 percent higher than the year ago quarter.

Strong Financial Results

For the year ending Sept. 30, the company also reported a dazzling 28 percent increase in sales to $19.1 billion.

Chairman and CEO Paul Jacobs told a roomful of Wall Street analysts who gathered in San Diego recently that increasing sales were “driven by increasing global consumption of wireless data across a diverse range of devices, particularly smartphones.”

The financial results have been so strong of late that it has surged passed Santa Clara-based Intel Corp., the traditional stalwart of the technology revolution, in terms of market capitalization, $109 billion compared with Intel’s market cap of $99 billion.

One factor is that sales of mobile devices such as smartphones and tablets — Jacobs said 300 million mobile devices were sold worldwide in the first six months — are overtaking sales of desktop and laptop PCs where Intel has been the dominate player.

That sales number represented an eye-popping 43 percent increase over the same period in 2011, said Jacobs, or “two-thirds higher than the total PC shipments.”

Accelerated Shift to Mobile

What’s more, that remarkable shift to the mobile realm is expected to accelerate over the next five years, he said.

Sharp and Qualcomm are collaborating to perfect displays using the new IGZO brand display technology and Qualcomm’s micro-electromechanical systems displays.

The Qualcomm technology is seen as a way to improve current screen technology, which hungrily consumes precious battery power.

The technology also works better for users, in that it is more sensitive for touch-screen applications, the mainstay of smartphones.

Never a company to rest on its laurels, Qualcomm continues to look at other ways to boost the appeal of its chipsets to both manufacturers as well as carriers.

The company has acquired the assets of Israeli based EPOS Development, which is pursuing digital ultrasound positioning technologies for use in smartphones and similar mobile devices.

Qualcomm executives said the technology would be added to future iterations of its Snapdragon chipset.

Zacks Investment Research, an equity research firm that follows the company, said in a blog, “We believe the long-term fundamentals of the company are very much intriguing given the gradual adoption of LTE enabled mobile handsets in the U.S., Japan, and South Korea and massive growth of 3G smartphones in China and India.”

Industry Growth

While Qualcomm rushes to the aid of a sinking Sharp, local executives are divining the future ability of wireless networks to accommodate a 1,000-fold increase in users over the next half decade.

They told analysts that the company is developing small devices placed in homes and offices that should help boost the ability of carriers to accommodate increased traffic.

The base stations, so-called femtocells about the size of a regular smartphone, should help networks boost their capacity a thousand times, they said.

That new technology can’t come soon enough.

The numbers predicted for the future growth of the industry are mind-boggling.

“If you look at the adoption rates, they’re really stronger than any other devices in the past,” Jacobs told the dozen and a half analysts in attendance. “It’s 5.6 times the pace of PC adoption in the ’80s. It’s double the adoption rate of the Internet in the ’90s. Smartphone shipments are going to pass feature phones in 2014, and we are seeing numbers like 5 billion cumulative sales between 2012 and 2016.” 

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