I appreciate that average selling prices of chips remain under pressure. I'm not suggesting that this deal is going to immediately Broadcom's fortune.
But even if this soft patch within the sector were to continue for a couple of more quarters, it's not unrealistic to expect that Broadcom will see a bottom eventually, if it hasn't already. And I believe it will be just a matter of time before the company regains its upper-tier status within the market.
I don't want to get too technical, but by virtue of this deal, there are also patents and applications that Broadcom will be able to use to leverage growth. It also seems that the Street completely missed management's comments about how this transaction will accelerate the pace at which Broadcom's first multimode platform becomes available.
With that in mind, although Qualcomm continues to dominate the sector with revenue growth of 35%, I believe Broadcom is now preparing to attack the market (particularly Qualcomm) in ways that we have not expected. Accordingly, it seems foolish to wait before taking a position in this stock, especially since shares are down more than 20% year-to-date on Qualcomm-domination fears.Qualcomm's a great rival, yes. But investors take for granted that Broadcom also does well in the realm of networking, where one of its biggest customers includes Cisco (CSCO). And that's not to mention that the company also generates revenue not only from both satellite and voice-over-IP (VoIP) components, but also from television set-top boxes. Finally, it comes down to the fact that this company is extremely well managed and has a business that is also strategically diversified. At around $26 a share, I believe the stock is cheap. And as long as cash flow continues to rise in the mid-to-single digit range, Broadcom's stock can command a fair value of $35. Qualcomm's still scoring, but the game is far from over. At the time of publication, the author held no position in any of the stocks mentioned. Follow @saintssense This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV