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Qualcomm Raises Shareholders' Wealth

Zacks Equity Research

Yesterday, Qualcomm Inc. (QCOM) announced that its board of directors has authorized a new $5 billion share buyback program, effective immediately. The new program will replace the existing $5 billion share buyback program which was declared on Mar 5, 2013. To date, the company has repurchased around 40.1 million shares for approximately $2.7 billion assigned under the previously announced share buyback program.

The tenure of the new share buyback program will depend on management’s discretion. The company can conduct share repurchase either in the open market, through 10b5-1 programs, in privately negotiated transactions or through the use of derivative instruments. Qualcomm stated that since 2003, the company returned $25 billion to its shareholders through either share buybacks or dividend payouts.

Qualcomm is a major chipset supplier to Samsung, which is currently the largest seller of smartphones globally. Additionally, the company is a major chipset supplier to Apple Inc. (AAPL) for its popular iPhones. Furthermore, Google Inc. (GOOG) has decided to use Qualcomm’s Snapdragon processor for its latest Nexus 7 tablets. The company has also been favored by the Windows 8 operating system of Microsoft Corp. (MSFT).

Earlier, Qualcomm raised its outlook for fiscal 2013 and is quite confident that it will be able to retain its current rate of revenue and earnings growth, going forward. We believe that the long-term fundamentals of the company remain intriguing given the increasing demand for LTE-enabled mobile handsets in the developed countries, rapid transition from 2G to 3G and 4G in China and India and increasing licensing revenues. Qualcomm has a very healthy cash position.

Recently, Qualcomm unveiled an innovative smartwatch called “Toq”. This smartwatch can simultaneously receive phone calls, send messages and play music. The new product will be available in the market from the fourth quarter of 2013. Qualcomm currently has a Zacks Rank #3 (Hold).

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