Looks like the runaway popularity of Apple's (Nasdaq:AAPL) iPhone is continuing to take a serious bite out of the competition.

IN PICTURES: 9 Ways To Use A Tax Refund

Shares Nosedive on Weak Outlook
Recently, mobile handset chip maker Qualcomm (Nasdaq:QCOM) saw its share price plunge more than 8% following the release of earnings and revenue guidance for the next quarter then fell short of analyst's expectations. After reporting expectation-topping earnings of 59 cents per share during the current quarter, Qualcomm now expects earnings for the next quarter to fall into the 51 to 55 cent a share range. (Learn about the controversies surrounding companies commenting on their forward-looking expectations in Can Earnings Guidance Accurately Predict The Future?)

As the world's biggest maker of cell phone chips, the bulk of Qualcomm's profits comes from fees paid to it by mobile phone handset makers that incorporate Qualcomm's chips. Under such arrangements, the amount of revenue Qualcomm gets is tied to the final selling price of the handset. Korean electronics giants Samsung Electronics and LG Electronics are among the company's larger clients.

Competing Smartphone Makers Losing Ground To The iPhone
As snappy as some of the new smartphone handsets made by Samsung and LG are these days, their appeal appears to be eclipsed by the apparently irresistible tech-cachet of owning an iPhone. That desire is reducing the sales of these competing products, and also lowering their prices producing a double-whammy effect to Qualcomm's bottom line. And average prices for these new handsets are expected to continue trending lower for the foreseeable future.

With global sales of smartphones now expected to grow by 46% - four times the rate of the overall handset market - a loss of competitive edge in this arena can have a serious impact on future profitability.

Google's Android Phones Can Be iPhone Killers
If there a chance that Qualcomm can maintain its profit momentum in the current environment, it lies with the company's Snapdragon processor, a higher margin product that now has found a home in new line of smartphones sporting Google's (Nasdaq:GOOG) Android operating system. Manufactured by China's HTC and carried by Verizon (NYSE:VZ), the handsets have gotten rave revues by tech pundits, who have claimed that they come close to rivaling the iPhone's elegance. However, with only 38,000 applications available for download, Google's Android offering is still miles behind Apple's massive library of 185,000 apps.

The Bottom Line
If Google's Android offering turns out to be the iPhone killer that everyone seems to be hoping for, then Qualcomm will be one of the clear winners in that scenario. But with recent numbers from Apple showing no letup in the overwhelming demand for the iPhone, the odds that anyone can steal Apple's momentum in this market are getting longer by the day. (For related reading, take a look at 6 Professional Apps Worth Buying.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!