by Mike Kapsch, Investment U Research
Tuesday, December 18, 2012
I’ve always been a late bloomer when it comes to technology.
For instance, I didn’t get an iPad until one was given to me last Christmas. The last gaming console I owned was the original Playstation. And I still haven’t bought a smartphone…
It’s sad, I know. But while I can live without the latest gaming device or iPad, I can’t help but realize how badly I should buy a smartphone.
The added benefits of having instant access to my email, the internet, countless apps, a quality camera and a GPS, all on a tiny cellular device, are undeniable. Yet there’s still another reason I want a smartphone now more than ever.
It’s called Near Field Communication (NFC). And thanks to an upcoming release from Qualcomm (Nasdaq: QCOM), by the end of next year, this technology should be more prevalent in mobile devices than ever.
A Part of Everyday Life
If you’re unfamiliar with NFC, it’s a short-range wireless technology, typically in the form of a small computer chip, which enables communication between devices.
Samsung (OTC: SSNLF) aired a recent commercial showing how NFC allows sharing of music and video playlists between Galaxy S III smartphones (while also making a jab at Apple’s lack of NFC on the iPhone 5).
Also, Sony (NYSE: SNE) released its own video that shows how NFC will soon be used for a number of things, including payments, security and personal fitness. Just watch the video below.
From this video, it’s easy to see how NFC could become an integral part of our daily lives. And people are already using the devices that NFC will integrate with. This fact only strengthens my premonitions that this is a technology right on the cusp of breaking into the mainstream.
New York market research firm ABI Research agrees.
This year, the company says payments made via NFC will total $4 billion. In just five years, that number is expected to explode to $191 billion. That’s an increase of 4,675%.
There may be no better time than right now to prepare for this massive NFC expansion. Not surprisingly, not every company involved is created equal. Here’s what sets Qualcomm apart.
Timing is Everything
True, Qualcomm isn’t leading the NFC chip market today. In fact, it’s just now getting started.
In the first quarter of 2013, it will begin sampling its first-ever QCA1990 NFC chip to mobile manufacturers. By the third quarter, the company expects its standalone chip will be ready for consumers.
The QCA1990 will have all the same capabilities that other leading NFC chips have.
But the differences between Qualcomm and everyone else’s chips are that Qualcomm’s NFC chip is half the size of its closest competitor, it’s cheaper and it eats up less battery power.
As TheStreet.com’s Gary Krakow reports, “If NFC is the future of mobile payments then Qualcomm’s new NFC processor should help bring that technology to future generations of portable devices.”
Up until now, the biggest gripes over NFC have been the size of the chips, their price and the drain they have on mobile devices’ batteries. But not only is Qualcomm tackling all of these issues at once. It’s also entering NFC at a time when the market is ready to move substantially higher.
A Solid Play
There are plenty more reasons to like Qualcomm as an investment.
For one, the company is currently a moneymaking machine. In its 2012 fiscal year, the tech firm reported record revenue, earnings and MSM chipset shipments. It raised its guidance for fiscal year 2013. Management also recently stated that, over the next fiscal year, Qualcomm is ready for double-digit growth.
Secondly, Qualcomm has a lot of money on hand. Its cash reserves total $12.3 billion. Meanwhile, debt on hand only totals $60 million. That gives it a lot of leeway to continue increasing shareholder value, even in the face of adversity.
It can’t hurt that the company pays out a dividend, currently yielding 1.6%. In today’s market environment, it’s always a plus anytime a company finds added ways to reward shareholders.
Qualcomm’s stock price is about $3.50 off its 52-week high. But unless the overall markets fall, or the company suddenly gives investors a reason to sell, I wouldn’t expect share prices to go anywhere but up in the coming months.
Now, time for me to go smartphone shopping.
MikeHow Qualcomm (Nasdaq: QCOM) Will Disrupt the NFC Market in 2013,