Do You Check Your Smart Phone After Sex? Qualcomm Thanks You

According to a Harris survey for Lookout Mobile Security that was reported last June, more than half of all Americans check their phones while they’re in bed; 20% check their phones right after sex; almost 40% check their phones while on the toilet, and 10% check them while in church.

It’s all good for Qualcomm Inc. (QCOM) the leading provider of technology that underlies the smart-phone revolution.

Qualcomm’s stock jumped 3.9% Thursday to $66.02, following a quarterly earnings report that blew past company forecasts and led to predictions of more improvement ahead.

Increasingly, Qualcomm looks like the best way to play the worldwide growth of the smartphone market. Investors in cell-phone makers have painfully learned that success is transient. Stocks of Apple (AAPL), Research in Motion (RIMM) maker Blackberry and Nokia (NOK) have all soared and crashed in recent years. But Qualcomm, which licenses technology and provides chips to all the major handset makers, seems poised to thrive as emerging markets migrate from 2G networks to 3G and 4G networks needed for data intensive smart phones.

Qualcomm earnings per share for the first quarter ended Dec. 31, rose 30% on a 29% revenue increase to $6.02 billion. Both numbers exceeded analyst estimates. Qualcomm executives raised their earnings guidance, and analysts followed suit.

After lagging the market for most of January, Qualcomm stock jumped on the earnings news, as seen in a stock chart, giving it a 7.1% increase for the month. The stock gain outdistanced most of its large semiconductor rivals, which include Intel (INTC), Texas Instruments (TXN) and Taiwan Semiconductor (TSM).

QCOM Chart

QCOM data by YCharts

The gains cemented Qualcomm’s role as the bellwether of the industry, after it surpassed Intel’s market cap last fall. Taiwan Semiconductor Manufacturing Co., a foundry that makes chips for many semiconductor companies including Qualcomm, is rapidly moving toward the $100 billion market cap level as well.

QCOM Market Cap Chart

QCOM Market Cap data by YCharts

Anil Doradla, semiconductor analyst with William Blair & Co. wrote in a report that the results come from “hitting the sweet spot of (the) once-in-a-decade 4g transition.” He noted that average-selling prices for Qualcomm chipsets actually increased in the quarter, even as volume increased. Generally companies report declining average-selling prices as products mature, but the industry move to higher value 4G chipsets has reversed that trend for Qualcomm.

David Wong, who follows the company for Wells Fargo Securities, wrote that Qualcomm only addresses about 20% of the 2G feature-phone market. But in the markets for 3G and 4G, which use the CDMA technology that Qualcomm dominates, it addresses 100% of the handset makers. Qualcomm is the only provider of LTE baseband chips, which are essential for handsets to use the fastest wireless networks. Traditional rival Broadcom (BRCM) hasn’t introduced any products in that arena, while Qualcomm is on its third generation chipset.

Despite its many advantages, Qualcomm has a lower PE ratio than its longtime rival.

QCOM PE Ratio TTM Chart

QCOM PE Ratio TTM data by YCharts

During its earnings presentation, Qualcomm highlighted the importance of growth in smart phones in emerging markets for its future. It said that during the current year, for the first time, smart phone shipments outside Europe, North America and Japan and Korea will exceed shipments in the developed markets. Even as the U.S, Japan and Europe are becoming replacement markets, the rest of the world is still moving rapidly to embrace the advanced technology. Indeed, in many countries smart phones are being purchased instead of PCs. The middle class in India and China and Africa will increasingly have family dinners interrupted by Facebook messages and twitter feeds, just as American dinners are.

Bill Bulkeley, a contributing editor at YCharts, worked for the Wall Street Journal for more than 30 years, covering high tech since the birth of the PC. He also wrote about the Internet and the imaging industry. He has written for Technology Review, Knowledge@Wharton and CIO Magazine. He can be reached at editor@ycharts.com.

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