Qualcomm Inc (QCOM)

[khemara_qc]

Three Picks In Handsets For A Strong U.S. Market
Ed Lin, 10.13.05, 12:34 PM ET
http://www.forbes.com/markets/2005/10/13/handsets-wireless-telecommunications-1013markets06.html?par...

SG Cowen analyst Christin Armacost said a third-quarter survey of survey of U.S. wireless retailers reinforces a "positive view on continued strength in overall handset demand."

In a research note, Armacost said survey results are positive for Brightpoint (nasdaq: CELL - news - people ), Qualcomm (nasdaq: QCOM - news - people ) and Motorola (nyse: MOT - news - people ), "all of which benefit from continued strength in the U.S. market and share shifts in their favor."

Total activations, including new and replacement accounts, rose 5% quarter over quarter, compared with a 2.8% increase in the second quarter. Armacost also noted that a higher percentage of respondents reported "net insufficient inventory" in the latest survey and sees support for a 2005 forecast for 18% handset sales growth year over year worldwide. The U.S. represents 15% of the worldwide market.

Armacost said Motorola continues to lead in the U.S. with some share gains at Verizon Wireless in the quarter, building off success at Cingular Wireless and T-Mobile. Verizon Wireless is a joint venture of Verizon Communications (nyse: VZ - news - people ) and Vodafone (nyse: VOD - news - people ). Cingular is a joint venture of SBC Communications (nyse: SBC - news - people ) and Bellsouth. T-Mobile is a unit of Deutsche Telekom (nyse: DT - news - people ).

"While we believe that share gains will drive outperformance for Motorola over the next one to two quarters, we continue to look for increased competition in the fourth quarter of 2005 and 2006," Armacost said.

Qualcomm will benefit from strength in CDMA adoption, while overall handset growth, increased outsourced logistics business, and a favorable inventory situation will boost Brightpoint.