Boston, MA 04/15/2014 (wallstreetpr) – QUALCOMM, Inc. (NASDAQ:QCOM) is ranked among the top 25 big dividend paying companies. The leading provider of mobile chips has decent track record of big, consistent and multi-year dividend payout. Although Qualcomm is already regarded as dividend giant given its favorable and long-term dividend history, recent developments might impact future dividends.
Dividend paid by the mobile chipmaker might be impacted negatively if indeed Apple Inc (NASDAQ:AAPL), one of its key chipset customers, decides to develop its own chipsets. Qualcomm generates about $7 billion revenue annually by supply the iPhone and iPad maker with baseband components (chipsets).
On that basis, Qualcomm generates $2 billion net income annually from its baseband supply to Apple Inc. However, some sections of the media recently reported that Apple Inc may ditch its baseband supply deal with Qualcomm as it begins to build its own baseband. It is reported that Apple Inc might dump Qualcomm as early as 2015. If that happens, it will come as a big profit and dividend blow to the chipmaker and its shareholders who have known expanding revenue, profits and dividend due to business contracts with leading consumer of mobile chipsets.
Conflicting views
Although no word has come from either QUALCOMM, Inc. (NASDAQ:QCOM) or Apple Inc to confirm or deny the reports, analysts believe that it will be difficult for Apple to abandon its baseband supply arrangement with Qualcomm anytime soon. According to Brian Modoff, analyst with Deutsche Bank, building baseband requires more than just huge financing for research and development. Instead, it takes time – up to five years – and a huge team of dedicated engineers to build chipsets from scratch. That being said, it seems highly unlikely that 2015 timeline for which Apple will disengage with Qualcomm will be possible.
However, Mr. Modoff observed that it was possible Apple Inc could be building its own app processor and internal WiFi chipset for better integration with the basebands it receives from Qualcomm.
No impact
Mr. Modoff, seeing no possibility of Apple Inc abandoning QUALCOMM, Inc. (NASDAQ:QCOM) in the foreseeable future, has a “buy” rating on the stock and price target of $86.
