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Wednesday, August 02, 2006

Cell Phone Nation: Qualcomm's Winning Hand

Stocks: (QCOM)(TXN)

Qualcomm's stock is down over 30% in the last 90 days. Puzzling, as is the drop in the stocks of other major suppliers to the cell phone industry like Texas Instrument.

If there has been on consistent message during this earnings season, it is that sales of cell phones and cell phone components, driven by Nokia, Ericsson, and Motorola, are going up like a rocket.

Even Jim Cramer says he is buying into the sector.

But, the advantages to firms like Qualcomm are very long term. As the PC is replaced for many of its functions by portable phones, the cell market is likely to get an even stronger sales boost. Qualcomm is moving aggresively into China with its recent alliance with China's Semiconductor Manufacturing International. The move into the 3G market in that country could have benefits for decades to come.

Qualcomm trades at $34,50 which is very near its 52-week low. The company's revenues have been up sharply quarter over immediately previous quarter for the last four reporting periods. Operating income is also growing strongly.

So, what is the difference between Qualcomm at its 52-week high of $53.01 and its stock price now. Not much, which means the stock should move up.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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