Drexel Hamilton Downgrades Qualcomm As Competition Intensifies

In a report published Monday, Drexel Hamilton analyst Richard Whittington downgraded the rating on

from Hold to Sell, while lowering the price target from $60 to $55. The analyst believes that chipset competition is increasing, setting the stage for royalty give-backs. The competition from Samsung Electronics and

is intensifying. On the other hand, with Samsung and

becoming more aggressive in offering baseband and app processors to OEMS at advantageous rates, the smaller mobile OEMs in China are now asking for price breaks. "Intel x86 protecting its data center and PC clients, Qualcomm has gotten right into Samsung's sights from years of aggressive license demands ," Whittington stated, adding, "Apple sharing similar views on how Qualcomm prosecuted a once commanding patent portfolio is also requesting better pricing." The analyst believes that

(ADR)

no longer offers a leading edge, and since Qualcomm does not wish to depend on Samsung, the company has struck an accord in China. According to the Drexel Hamilton report, "Just where last week's announced 14nm process development deals go, they're liable to take time to bear fruit, TSMC 10nm at best two years out. Until this, Qualcomm will steadily but slowly ramp IoT adjacencies liable to run at a lower net margins to what was previously enjoyed." The FQ4 estimates have been lowered to reflect a decline in gross margins, as the company works to sustain its presence in the sockets and overall markets.