Research Analysts Kulbinder Garcha 212 325 4795 firstname.lastname@example.org Deepak Sitaraman, CFA 212 325 5808 email@example.com Achal Sultania 44 20 7883 6884 firstname.lastname@example.org Alban Gashi 212 538 3033 email@example.com Talal Khan 212 325 8603 firstname.lastname@example.org Matthew Cabral 212 538 6260 email@example.com Vlad Rom 212 325 5442 firstname.lastname@example.org
Growth robust...time to think compute
Raising smartphone estimates. We raise our global smartphone market forecast by 9%/15% to 688mn/885mn units (46%/29% growth) in 2012/2013, driven strength in both high end and low end segments. We believe the addressable market for smartphones is 2.35bn longer term, resulting in effective penetration of only 33% currently. With significant improvements in availability of lower end smartphones and LTE being an incremental driver, we expect effective smartphone penetration to rise to 100% and lead to smartphone volumes of 1.18bn units by 2015, 26% CAGR. On ASPs we believe the mix shift down market can be offset by Apple’s unprecedented ability to grow the high end, and hence see limited pressure near term. Credit Suisse smartphone vendor scorecard – Apple, Samsung, Nokia in the top three. We continue to rely on our proprietary smartphone vendor scorecard which is based on nine metrics (software, services, cloud, product, brand, distribution, compute convergence, IPR and chipset efficiency) which we believe drive success in smartphones. We conclude that secular share gainers will be Apple, Samsung and Huawei and see scope for Nokia’s share to recover. There are increasing signs of vulnerability for Motorola Mobility, HTC and Sony and a rapid decline for RIM. It is about more than just the phone now…think compute. Increasingly, we believe that success in smartphones will be impacted by success in PCs and tablets. The ability to compete across all segments will be driven by software, services and hardware offerings across device types, with success in one area driving halo effects in the other. In this new paradigm of the compute market, we believe Apple remains best positioned. Apple – excelling in the compute market, still room to gain smartphone share. For Apple, we raise our above consensus EPS estimates by 5%/10% for CY12/CY13 driven by higher iPhone volumes. Apple, even with its current price point, can drive smartphone share to 23% in 2012/2013, up from 19% last year, driven by expanding distribution and an innovation advantage. Add to this, the company’s robust tablet offering and competitive differentiation on PCs, and we believe that Apple can deliver an unrivalled compute experience. Our new TP of $750 (from $700 previously), is based on a multiple of 12x applied to our taxed CY13 operating EPS of $60 and adding back onshore net cash per share ($35). Qualcomm – strengthening its lead in the smart era. We raise our EPS estimates for Qualcomm by 3%/9% for FY12/FY13 to $4.00/$4.55, based on stronger growth in Qualcomm’s addressable market (CAGR of 20% long term). We now forecast that Qualcomm’s licensing business will grow 17%/19% in FY12/FY13 given strong smartphone growth, a moderate uplift to ASPs and a stable royalty rate. For QCT, we expect WCDMA chipset share to approach 60% given strong alignment with the winners. Such a lead will be strengthened in our view with the move to LTE and 28nm. Nokia – heading for third position, 2012 a difficult year. Although we acknowledge that 2012 is a transitional year for Nokia, we maintain our OP rating and view that the company can be a sustainable #3 player in smartphones achieving 11% share long term, based on carrier support, competitive pricing and strength in brand/distribution. Our 2012/2013 EPS falls to €(0.05)/0.45, given near term pressures on Symbian. €
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