QUALCOMM, Inc. (NASDAQ:QCOM) and Intel Corporation (NASDAQ:INTC) are two of the major players in the changing LTE modem market, but one could rule the market while the other remains stagnant, according to analysts at Susquehanna Financial Group. Using a poker analogy, they covered most of the big names in LTE modems and say Qualcomm is the best of them all.
Qualcomm’s got “pocket aces”
Analysts Chris Caso and Liz Pate are predicting that QUALCOMM, Inc. (NASDAQ:CQOM)’s dominant position in the market will be secure at least through next year and possibly even into 2015. They note that the modems released by the company’s competitors only now have features which are comparable to the features offered by Qualcomm’s models two years ago.
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They believe Apple Inc. (NASDAQ:AAPL)’s iPhone 6 will be one of the first devices to use Qualcomm’s 9625 modem, which will support 150 Mbps download speeds and carrier aggregation. The analysts said this “ups the ante” for the rest of the LTE modem space and sets up those features as the standard for the mid to high end of the market.
As a result, they believe worries about margin erosion for QUALCOMM, Inc. (NASDAQ:QCOMM)’s QCT business next year because of competitive pressure are overblown. They expect the company to offer some longer-term margin targets at their analyst meeting in November, which could serve to quell some investor anxiety in this area. The analysts reiterated their Positive rating on Qualcomm in their latest report.
Intel is “the whale”
Second on the analysts’ list is Intel Corporation (NASDAQ:INTC), which they call “the Whale.” They think the company has little choice but to keep investing in cellular modems, but they don’t see the company’s offerings to be a big market mover any time soon. They note that the dynamics of the PC market, particularly falling system price points, will be the only thing that matters for Intel over the next couple of years.
They note that Intel Corporation (NASDAQ:INTC) will launch its XMM 7260 cellular modem next year, which the company has said would have LTE Category 6 LTE support and carrier aggregation. The analysts said if this product does what Intel says it can do, they expect it to be a competitive modem. However, the market for standalone modems is pretty small. They believe that in order for Intel Corporation (NASDAQ:INTC) to “achieve meaningful penetration,” the company must offer an integrated AP / baseband modem, but it has not shown a roadmap for a product like this yet.