Concluding a six-month strategic review instigated by hedge fund Jana Partners, chip giant Qualcomm Inc has decided not to split into separate chip making and technology licensing businesses.
The current structure of the San Diego-based Qualcomm - biggest maker of chips used in mobile phones, offered unique strategic benefits that cannot be replicated, said the company.
Qualcomm said it had "a focused plan" in place that it believed would drive growth even as its Chief Executive Steve Mollenkopf did not elaborate. The company earnings have slumped by more than 40 percent in each of the last three quarters.
The company has managed to attain leveraging of its relationships with its customers, especially those in Chin, even with the existing structure of the company. This customer relationship leveraging strategy is slowly also spreading to other countries as well.
People familiar with the matter said that one of the largest share hodlers of the company, Jana, was comfortable with Qualcomm's decision and supportive of the board's efforts. Jana owns about 28.6 million Qualcomm shares as of Sept. 30.
Driven by increased shipment of 3G and 4G devices, the licensing business of the company was being helped and cost cuts were taking hold, the company said. This has resulted in stronger than expected business for the company in the current quarter.
The earnings per share for the quarter, the company expects, would be the same or modestly above the high end of its forecast range, the chipmaker said. Earnings of 80-90 cents per share for the quarter has been forecast by the company.
Qualcomm's profits have been driven for years by its technology licensing business due to the royalties it collects on the chip-technology developed by its chipmaking unit.
"I think it's better that they didn't split. I'm happy about that," Tigress Financial Partners analyst Ivan Feinseth said. He added that even without a split in the company, Qualcomm can continue to outsource hardware manufacturing.
Qualcomm did not come up with any value-boosting plans which surprised some analysts.
"We have a hard time believing that keeping the status quo will help the stock rebound," BMO Capital Markets analyst Tim Long wrote in a note.
The shares of Qualcomm have seen a rise of around 3.5 percent after the news after its share values had seen a slip of almost 40 percent this year.
Jana, which unleashed a public campaign to reform Qualcomm in April, had nominated two members to the special committee that carried out the review of Qualcomm.
Acquisitions were considered as part of the review, said Mollenkopf on an analysts' call.
There is a rush among the chip makers for mergers and splitting this year as the companies try and adapt and offer diversified products to new trends such as the "Internet of Things" and as the companies seek to meet demand for cheaper chips.
Feinseth said Qualcomm should also join the fray, buying, for example, Apple supplier Skyworks Solutions Inc.
(Source:www.reuters.com)
The current structure of the San Diego-based Qualcomm - biggest maker of chips used in mobile phones, offered unique strategic benefits that cannot be replicated, said the company.
Qualcomm said it had "a focused plan" in place that it believed would drive growth even as its Chief Executive Steve Mollenkopf did not elaborate. The company earnings have slumped by more than 40 percent in each of the last three quarters.
The company has managed to attain leveraging of its relationships with its customers, especially those in Chin, even with the existing structure of the company. This customer relationship leveraging strategy is slowly also spreading to other countries as well.
People familiar with the matter said that one of the largest share hodlers of the company, Jana, was comfortable with Qualcomm's decision and supportive of the board's efforts. Jana owns about 28.6 million Qualcomm shares as of Sept. 30.
Driven by increased shipment of 3G and 4G devices, the licensing business of the company was being helped and cost cuts were taking hold, the company said. This has resulted in stronger than expected business for the company in the current quarter.
The earnings per share for the quarter, the company expects, would be the same or modestly above the high end of its forecast range, the chipmaker said. Earnings of 80-90 cents per share for the quarter has been forecast by the company.
Qualcomm's profits have been driven for years by its technology licensing business due to the royalties it collects on the chip-technology developed by its chipmaking unit.
"I think it's better that they didn't split. I'm happy about that," Tigress Financial Partners analyst Ivan Feinseth said. He added that even without a split in the company, Qualcomm can continue to outsource hardware manufacturing.
Qualcomm did not come up with any value-boosting plans which surprised some analysts.
"We have a hard time believing that keeping the status quo will help the stock rebound," BMO Capital Markets analyst Tim Long wrote in a note.
The shares of Qualcomm have seen a rise of around 3.5 percent after the news after its share values had seen a slip of almost 40 percent this year.
Jana, which unleashed a public campaign to reform Qualcomm in April, had nominated two members to the special committee that carried out the review of Qualcomm.
Acquisitions were considered as part of the review, said Mollenkopf on an analysts' call.
There is a rush among the chip makers for mergers and splitting this year as the companies try and adapt and offer diversified products to new trends such as the "Internet of Things" and as the companies seek to meet demand for cheaper chips.
Feinseth said Qualcomm should also join the fray, buying, for example, Apple supplier Skyworks Solutions Inc.
(Source:www.reuters.com)
