Wireless Changes Can Benefit Qualcomm, Research in Motion

Thought I’d group together a couple of bullish notes from UBS Securities’ Maynard Um, as both notes illustrate some dramatic changes in the wireless business, which may redound to the benefit of Qualcomm (QCOM), which makes chips for phones, and Research in Motion (RIMM), which of course makes the Blackberry e-mail device.

Trend one: chip diversity. Nokia (NOK) and the Sony-Ericsson joint venture of Sony (SNE) and L.M. Ericsson Telephone (ERIC), will be the last two companies currently using only one chip supplier to open up to multiple suppliers for each phone, says Um. Qualcomm could benefit as it gains access to accounts at those two companies that have been held by, say, Texas Instruments (TXN).

“General consensus among industry vendors/suppliers points to the belief that the top 5 handset OEMs will have multiple supplier strategies in the future. In 3G chipsets, Nokia and Sony-Ericsson are the sole single source vendors left. While there are certain issues between Qualcomm & Nokia today, we believe Qualcomm may be well-positioned to vie for the business.”

Um also thinks that a rumored press conference between Nokia and Qualcomm to perhaps announce a resolution in their wireless patent dispute is likely to take place on Feb. 28, contrary to internet rumors of Feb. 21. He says it’s inevitable that Nokia and Qualcomm will resolve their patent differences, though when they will is uncertain.

Trend two: 3G phones really take off in 2007. Research In Motion’s sophisticated — and pricey — e-mail devices will get a lift this year as the phones using higher-bandwidth “third generation” services really take off at last. (We’ve heard that one before.) Um says that last week’s 3GSM wireless trade show in Barcelona, Spain, showed that RIMM still has the best line-up of sophisticated phone-computers: “We saw little evidence that competitors made material gains against RIM in the enterprise market relative to end-to-end security, support, & distribution.” In particular, Um expects RIMM’s recently introduced “8800″ device, a follow-on to its popular “Pearl,” to prove quite successful, boosting the May quarter.

Um is right at the median among analysts with his $50 price target on Qualcomm shares, but comfortably above the median with a $172 price target for RIMM shares.

This morning, RIMM shares are down almost 1% at $137.83, as are Qualcomm shares at $42.17.

RIMM vs. QCOM 1-yr chart