Posts Tagged ‘LTE’
Apple iPhone 5C And 5S Could Drive Shares Back Above
I recently wrote up my long thesis on shares of Broadcom (BRCM) following the company’s earnings report. My article was published on July 29th, and since then shares have actually traded down a couple of dollars, which amounts to a decline of roughly 7%. While the near term price action continues to be discouraging, I still believe that the shares offer a tremendous opportunity here from a long term risk/reward standpoint. I further believe that a few near term catalysts could drive sentiment significantly upward.
The Sentiment Has Been Far Worse Than ExpectedWhile the sentiment following the report has been unfavorable, it is actually surprising the degree to which the sentiment has continued to be negative even at current prices. Of course, from a technical perspective the stock is in pretty rough shape, but even from a fundamental perspective, investors seem to still be on edge, despite a 33% drop from the stock’s 52 week highs.
One thing that is commonly perpetuated is the idea that Broadcom is losing market segment share. This is due to the loss of a few very visible smartphone and tablet sockets in which Qualcomm (QCOM) displaced Broadcom. The thing with the smartphone/tablet market is that investors are typically focused on a select number of popular designs, often forgetting that the market is gigantic and that there are many “unsung” designs.
On the most recent call, CEO Scott McGregor made the following statement,
So I believe share looks good this year. I don’t see any share loss of any proportion here. I think it looks stable and in fact we’ve got great technologies. And I would encourage folks do a little research on share that we are gaining at other customers that offsets maybe a model or two we loose with the customer they highlighted. So again, we are not going to get 100%, you will always be able to find some models we don’t win. But you need to look at the total set and we believe we’ve got a pretty complete database of every handset model we are aware of in the industry and where we stand in each one of those, and we believe we’re good.
Now, of course while Mr. McGregor’s information/view is accurate as of the July 23rd call, the market understands that it is not unprecedented for even the strongest management team to get it wrong forecasts are always tricky. However, at least for this year, the designs that are rolling out have been in the works for quite a while (likely at least 6 months 1 year) and the components largely set in stone. I’m still convinced that Broadcom’s technology leadership in connectivity/WiFi will allow it to maintain share there, so that doesn’t worry me.
The real issue, and what seems to have really soured sentiment, is the weakness in the company’s 3G baseband business. It’s not surprising that 3G is weak, particularly as Intel (INTC) another baseband player with strong 3G exposure reported a pretty weak quarter there. The secular trend is clear: 3G only is on its way out, and LTE multimode is rapidly gaining traction. Cognizant of this trend, investors have up until recently been encouraged by Broadcom’s LTE efforts. The company has been showing off its LTE Advanced solutions for quite some time, and had promised that the solution would come to market in 2014.
Now, this is where people got a little too excited, which led to the run to $38 earlier this year. While Broadcom had promised “2014” all along, many had assumed that material revenue would start coming from the LTE opportunity during 1H 2014. It turns out that while the chips are sampling now and will begin to ship during 1H 2014, material revenue is not likely until 2H 2014 (probably beginning in Q3). Investors of course not wanting to own the stock until a nearer term catalyst is on the horizon, were discouraged and have been panic selling, which is part of why the shares continue to be in the penalty box.
However, while investors do need to wait a while before the LTE news cycle ramps back up again, I do see some potential near term drivers for more opportunistic investors unsatisfied by a longer term argument. The obvious fear is that as Apple (AAPL), as it rolls out its next generation iPhone 5C, will also move to a Qualcomm connectivity chip, and given the market shift towards lower end devices, this could prove a problem for the company. It is a given that the firm will use a Qualcomm modem, probably paired with an older variant of Apple’s “A” series system on chip, but the question is whether Broadcom can still keep its combo chip spot. Interestingly enough, Apple has a tendency to use “the best”. But this insistence on “the best” has always been within the context of a high end device that commanded a healthy margin profile.
That being said, the low end isn’t exclusively the domain of Broadcom’s competitors, and I am sure that the company could offer a low cost, defeatured solution if necessary. Further, Apple has a very long history of using Broadcom’s chips in everything from the iPhone and iPad to the MacBook Pro, so it is likely that unless Qualcomm gives Apple a really compelling deal that, for whatever reason, Broadcom can’t match/beat, Broadcom is probably going to be inside the next generation iDevices that will likely be announced on September 10th.
My belief is that while nothing is a sure thing, the market share loss fears could subside if Broadcom ends up winning the iPhone 5C combo chip spot. This would lead analysts and industry watchers alike to maybe believe that maybe the sockets that Broadcom did lose were just highly visible examples of the fact that Broadcom has never had 100% of the LTE smartphone combo chip market, but that this did not represent anything that fundamentally dented the fundamental market share story.
If Broadcom does lose this socket, however, then it will be interesting to see how the shares react. If the Street had been pessimistically baking this into the forecasts, then we may see limited downside from current levels. However, if this is completely unexpected even from the bearish analysts/investors, then this could represent a material overhang on the shares. That being said, CEO McGregor’s confidence that there would not be a material negative market share shift tends to limit the potential risk of this downside scenario.
Apple 5S Could Help, But Not As MuchBroadcom’s two biggest customers are Samsung (OTC:SSNLF) and Apple, whom are not coincidentally the two largest players in the smartphone space today. While I would be optimistic about the iPhone 5S potentially driving market share gains for Apple, and by extension help Broadcom, the problem is that the share would likely come out of Samsung’s shipments which also include Broadcom’s chips. Further, almost every high end smartphone uses Broadcom’s chips. While Broadcom’s inclusion here could help to bolster the view that Broadcom’s high end combo chips are leadership, this is not something that I believe is in question.
ConclusionThere is much more to the Broadcom long term thesis than what I’ve presented here, particularly as the company’s networking business continues to be strong (secular growth + share gain), and the home business is holding up flat to modestly up in a down market. Broadcom is, through and though, an engineering centric powerhouse and I believe that the setback in the share price will, in the rear view mirror, look like a solid buying opportunity. However, if Broadcom wins the upcoming iPhone 5C, then this could significantly help stave off the fears of market share loss and could drive a material improvement in sentiment and drive shares up in the near term.
Source: Broadcom: Apple iPhone 5C And 5S Could Drive Shares Back Above $30
Disclosure: I am long BRCM, INTC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More.)
Apple iPhone 5 What Specs and What Date
The ongoing speculation apart, it is now nearly certain that we are about to witness a summer release for the Apple iPhone 5. Well, several pointers lead to this rather safe and possibly the most realistic of assumptions. Like its predecessor, the Apple iPhone 4, the Apple iPhone 5 is also heading for a June 2011 release only.
Let us now look at the possible reasons behind the stated and likely June 2011 release
The suggested early 2011 release of the Apple iPhone 5 has not happened. We are now fast approaching the end of the first quarter of 2011. The Wall Street Journal (WSJ) had predicted that Apple will instead of releasing the iPhone 5, will launch a smaller version possibly called the Apple iPhone Nano in order to take on the cheap Android based smartphones from the competition selling in the market place.
Apple has just got its Apple iPad 2 out of the way. Now, it would be pretty unrealistic to expect Apple to produce an Apple iPhone 5 with at least one or two path breaking technologies so soon.
Now, this is the best reason that clearly points to a June or early July 2011 release for the Apple iPhone 5. Apple has gone ahead and orderred the manufacture of 10 million units of the iPhone 5 with its Chinese manufacturer, Pegatron. Now, this is double the quantity that Apple fixed for the Apple iPhone 4. The production of so many iPhones is most certainly going to require some time.
The two major new attractions that Apple is contemplating NFC (Near Field Communication) that enables your handset to be used like a credit card for swiping for making payments, and the LTE that would render the iPhone 5 device to run like 4G network compatible handset all are going to consume some reasonable time. Apple cannot work magic all the time. Any discussion on Apple iphone 5 cannot end without there being some speculation on the possible specs that the new supposedly fifth generation iPhone is going to carry.
Here we have given a comparison of the possible specifications of the new iPhone with that of the Apple iPhone 4
Apple iPhone 4 :
OS iOS verison 4. Processor A4 1 GHz. Camera Five Mega pixel with auto focus and LED flash. Media Player MP3 Player. Display and Resolution 3.5 inches wide retina display; capacitive and touch and scratch sensitive. Connectivity GSM and 3G. New Features Retina Vision Display Technology. Apple iPhone 5 :
OS Upgraded version of the iOS. Possibly iOS 4.1 or even iOS 5. Processor A5 dual core processor 1.2 Ghz. Camera Eight Mega Pixel with a possible basic snapper at the front for video calling. Media Player MP3 as well as MP4 player. Display and Resolution Possibly 3.7 inches wide with the rest of the works. Connectivity GSM, CDMA and possibly 4G. New Features NFC (device to serve as E Wallet and LTE (for 4G connectivity). Price Factor :
As things stand today, it does seem highly unlikely that Apple is going to discontinue the pricing policy that it had adopted for the Apple iphone 4 deals. This means you can look forward to plenty of standard iPhone contracts selling the new iPhone 5.
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The iPhone 5C
The iPhone 5cAbout a month ago I went into T Mobile to get an HTC One because I’ve been wanting that phone for a while. Well every T Mobile was sold out of the HTC One, so I began investigating the iPhone Color. I was impressed by the difference of the back on the iPhone C compared to the regular iPhones. The iPhone 5c’s color part acts as a case. I have dropped this phone quite a few times and there is not one crack on my iPhone. The last time i dropped it was from my truck bed and my phone landed on its face on asphault and still not one single crack! That final experience is what inspired me to write this blog. I have a friend who invested in the HTC One and on its second fall her phone was smashed. There are no accidents that there were no HTC’s available because I break phones a lot. I got the blue color iPhone and could not be happier with the results.
The Difference Between an iPhone 5/ 5s and an iPhone 5cThere is a major difference between these phones. The regular iPhone’s and the 5/5s are made with aluminum which can bend very easily, this is why iPhone’s break easily when dropped. Apple’s iPhone 5c is made with a plastic which does not bend nearly as much as thin aluminum. Think about how many plastic things you actually break. Now think how many skinny aluminum, or if you have the glass edition even, things do you break? Plastic is much stronger than both of these materials. If you want an iPhone that lasts a long time go with the iPhone 5c, you will not be disappointed!
Features of the iPhone 5cThe iPhone 5c is made of a type of polycarbonate, which is plastic but not all plastic is polycarbonate. Polycarbonate is a plastic used that is shatter resistant making the iPhone 5c durable. Apple lacquer painted the plastic so that the phone won’t even scratch that bad at all. The iPhone 5c has a A6 chip so everything runs fast and your battery will not be drained for a very long time. This phone has up to 13 LTE bands, which is more than any other smartphone on the market as of now. That means you can enjoy the fastest downloads, uploads and streaming. It has an 8 mega pixel camera that gives you very high quality photos. It has many camera features such as panoramic view, filters and square lens. You can record videos at 1080p HD, now that’s amazing! Even when you want to Face Time with your friends, it will be in high definition. The iPhone 5c comes in a variety of colors; blue, green, red, yellow and white.
Audio Quality The sound quality on this phone is excellent. It is similar to the other iPhone 5 editions but, I find it to be a bit louder and uses more bass. Conveniently, each iPhone comes with an amazing pair of headphones as well. I rate the audio quality 5 stars for this iPhone.
FaceTimeFace timing on the iPhone 5c is awesome. The picture quality is in high definition so you can see your friends perfectly! You have the option to accept or decline a FaceTime call just as a regular phone call. I haven’t had any disconnections or any lag with the FaceTime on this model of iPhone. You can FaceTime anyone who has an Apple product!