Deutsche Bank (DB)‘s Brian Modoff is the latest analyst to dismiss speculation about Apple (AAPL) developing an in-house baseband wireless chip for use in future iPhones and iPads.
In a research note to clients Monday, the analyst reiterated a ‘Buy’ rating on Qualcomm stock, and an $86 price target, noting that recent rumors about Apple moving away from Qualcomm (QCOM) as its supplier of baseband wireless chips, are just that, rumors. Furthermore, Modoff explains that while Cupertino has the money to enter the baseband market, an Apple baseband would be almost impossible for the iPhone maker to achieve for the moment. He estimates it would take the tech giant about five years of investment and over 1,000 engineers to develop a custom baseband for its iDevices.
“[E]veryone (referring to his industry sources) we spoke with dismissed the idea,” said Modoff, adding that “[a]s most who follow the wireless industry understand, building a multi-mode baseband is not about R&D dollars. Sure dollars will help, but it also takes time, at least five years by our count, top-notch talent leading the effort and about 1000 engineers in total – well-short of the 30 positions Apple currently has posted. Instead of an organic baseband development, we believe Apple is rather trying to realize better integration with existing baseband chipsets and their apps processor, or possibly developing their own internal WiFi chipset. We reiterate our Buy on Qualcomm, as we do not feel that this recent press report affects Qualcomm’s long term prospects.”
Shares of Qualcomm closed at $79.14 on Monday, extending their 2014 gains to 6.59%.
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