The Six Five team talks about the recent Qualcomm Investor Day event.
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Transcript:
Patrick Moorhead: So let’s move on to the next topic. Qualcomm had its investor day, which Daniel you were there and fortunately I could not make it, but it looked like a phenomenal event. I did watch the whole event over videos and the way that I would like to summarize this is they really showcased their diversification beyond the smartphone modem, growth and resilience. Those were my headlines. And even though Dan, you and I have been chatting about Qualcomm’s transformation beyond the modem for a long time, I don’t think a lot of investors really got it.
So what Qualcomm did a few quarters ago is they broke the numbers out. So they showed what Qualcomm calls IoT, automotive and their RF business. But what we saw was a double click into those businesses that I thought was super important. I’ll leave some of that oxygen for you because I won’t do the drill down in that.
But what Qualcomm did show that was amazing, I like to call it Apple proof, meaning what they showed is that over time, their reliance on Apple gets down onto low single digits by the end of fiscal year ’24. And my hope is that blows up all, all the memes that are out there that somehow they’re completely tied to Apple and whether it’s automotive, whether it’s RF, whether it’s the five different sub-segments inside of IoT, the company is doing that. And if you look back, if you go back maybe six or seven years, this was a major issue that investors had with the company so much so that they didn’t believe the company. They chose Broadcom over Qualcomm. Okay, if you remember that the vote was going in there at the last minute, Trump came in and essentially saved the company, but investors were literally going to sell this company to Broadcom because it didn’t necessarily trust.
And Qualcomm is finally getting its day in the market. Their stock is soaring, saw some really great growth. And it’s good to see there’s a lot of execution though, between now and then Daniel that they’re going to have to do. Qualcomm is writing some pretty large checks, and I mean that in the figurative way. $30 billion auto backlog up from another $10 billion and some other giant numbers in RF and IoT.
Daniel Newman: Yeah, Pat. You mentioned a lot of good things. And I think my most popular tweet from the Investor Day was the one where I shared exactly what you zeroed in on, which is the Apple proof. The market had been extraordinarily punitive towards Qualcomm when the Apple stuff came down. And as Apple has launched its 5G, there’s been an expectation that Apple would eventually completely migrate off of Qualcomm’s technology and that would somehow be devastating to Qualcomm. And I think being able to come out and basically saying, “Yeah, it’s a number, but it’s not that big,” is really something that investors are going to take note of. And by the way, the market absolutely roared behind Qualcomm during Investor Day. So this company’s a company that’s had a couple weeks of absolute terror in a good way between its earnings, which were blowout results. And then now Investor Day where the company put some additional context behind these numbers.
The other sub-story, Pat, that you acknowledge slightly when you mentioned the automotive backlog hitting $13 billion, there was an announcement this week of BMW making a significant commitment to the Qualcomm Snapdragon Ride and basically their whole platform, which is the telematics, infotainment and of course ADAS that’s going to be supported by the finalization of the [inaudible] acquisition. That was a huge win BMW group for Qualcomm’s whole end to end integrated automotive stack, but it’s really been about their adjacent businesses as a whole. Everyone has looked at this as a handset company and an IP company. A company that sells its innovation to everyone else to use, and a company that makes chips for handsets. The chips for handsets part has been what’s valued the company and that’s why that Apple thing has always been such a big deal. But what a lot of people be on that and the licensing haven’t realized is this company has now created two plus, I’ll call it two plus businesses that are generating billions of dollars per year that have nothing to do with their handset and licensing under QCT.
You mentioned automotive, which by the way, is just going to miss a billion in actual revenue, but with a $13 billion pipeline, that’s why I called it two plus. But then you’ve got IoT, which is now over a $5 billion annual business for the company. It’s grown 67% this year. And then you’ve got the RF front-end business, which is an extremely difficult business to do and to replicate. They’ve instantly on the mobile-end, come in overtaken Broadcom, which you mentioned, Pat, growing 76% from $2.4 billion in fiscal year ’20 to $4.2 billion in fiscal year ’21 with some triple digit growth quarters.
And Pat, I just want to say this because we like to ring our bell when we occasionally get it. But just seven days before Qualcomm’s valuation was about $160 billion market cap. I wrote an article on MarketWatch, and I said, this company will be of the next companies to hit $200 billion and hit mega cap status. Well, I believe, Pat, that it was like seven days after I wrote the article, the stock went up $30 a share, and it actually did hit about $203 billion last week on Wednesday when we were at Investor Day.
So sometimes, Pat, we get it right, sometimes we get lucky, but this case, I think we were a little bit of both. But yeah, what a great week for Qualcomm. The company has to feel great, but to your point, big checks being written, and now that they’ve gotten that zoom boom evaluation, it’s going to be up to them to back it up because people are not going to be satisfied if the growth alters or slows in any way.
Patrick Moorhead: Yeah, it’s exactly right. And if I can do a loop back on in the automotive, they did fantastic on there. I had a lot of questions on, hey, does this mean Intel’s getting kicked out? The answer is no. Qualcomm won year ’25 and maybe beyond that, but Intel is very much still a partner at BMW and so those are always the things that… The questions I always ask, because okay, you got to win which model year? It is it exclusive for that year? How many years and what driving level? But regardless of any answer on that, by the way it is ’25 model year. It’s a big win for them. And adding that to the GM win just makes it even bigger. And quite frankly, from a monetary point of view, I think the GM win is going to be bigger than the BMW just because the volumes are so much higher there. But congratulations to the company.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
