Qualcomm Snaps Up Summit Micro

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Qualcomm Inc. (QCOM), world’s largest chipset maker, has acquired Sunnyvale, California-based Summit Microelectronics – a developer of programmable power integrated circuits. The financial terms of the deal are yet to be disclosed though we expect the acquisition to improve Qualcomm’s power management and battery charging performances. 

Summit Microelectronics makes highly integrated power management solutions that regulate battery power for mobile phones, tablets and e-readers. Summit possesses key products, technologies and design innovations in battery charging and DC-DC converters, which will help Qualcomm to broaden its product portfolio.

The advent of 3G wireless technology has spurred the adaptation of smartphones and tablets with advanced computing capacities and high resolution screens. In addition, the introduction of superfast 4G LTE technology needs to be supported with LTE enabled devices.

These state-of-the-art technologies enable customers to download and transfer data, songs and videos much faster than before. However, in order to support these technologies, a smartphone should be backed up with sophisticated battery management.  

We believe that the Summit acquisition will help Qualcomm enhance the battery life of the devices, thus increasing the competitiveness of its proprietary chipset solutions. The San Diego-based company already has an impressive customer base which includes the likes of Apple Inc. (AAPL), Nokia Corporation (NOK) and Samsung Electronics among others. The acquisition will further help the company to meet the complex design needs of a broader customer base.  

This is the third acquisition by Qualcomm in almost a year and second in the last six months after the company purchased a large portfolio of assets and technology from HalolPT, which provides wireless charging technology for electric road vehicles. However, in spite of its acquisition spree, the telecommunications giant continues to face stiff competition from Alcatel-Lucent (ALU), Ericsson AB (ERIC) and ZTE corp.

Recommendation:

We are maintaining our long-term Neutral recommendation on Qualcomm. Currently Qualcomm has a Zacks #2 Rank, implying a short-term Buy rating on the stock.

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