- Phillip Apps
As required by management, this year I will give an introduction on some companies in the assigned sector. The third company I will introduce here is Qualcomm Inc., which has their stock traded in US, Mexico and UK.
QUALCOMM, Inc. was founded in 1985. The company engages in the development and design of digital telecommunications products and services. It operates in three main segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI). The QCT segment develops and supplies integrated circuits and system software based on technologies for the use in mobile devices, wireless network, IoTs etc. The QTL segment grants licenses and provides rights to use portions of the firm's intellectual property portfolio. The QSI segment focuses on opening new or expanding opportunities for its technologies.
The net income in 3rd quarter is 845mil, which decrease 61% compare with last year, while revenues drop 49% to 4.9 bil. The drop in revenues mainly due to the one time settlement (4.7bil) in licensing with Apple and other manufacturers recorded in Apr 2019.
The QCT segment generate most of the revenue (77.8%), it is increased 7% due to the increase demand on 5G products which offset the effect of COVID-19 outbreak.
The QTL segment revenues decrease 19% primarily due to the reduce royalty revenue from Huawei and the effect of COVID-19.
Risk and Challenge
1. The disputes between US and China have great effect on the technology sector, especially Huawei, which is the main target of US government. This may affect the deal between Qualcomm and Huawei on license granting at Jul, 2020.
2. The outbreak of COVID-19 hinders the demand on the telecommunication products.
3. The risk on global economic downturn has negative effect on company sale and R&D progress.
Market closing price (17/8/20): USD112.18
Current ratio: 1.88x
Operating margin: 33.29%
Company quarterly report, 3rd Quar, 2020
I, Tsui Man Fai, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.