Proving the Business Case for the Internet of Things

Qualcomm pulls plug on NXP takeover

Steve Rogerson
August 2, 2018



Qualcomm has cancelled its planned takeover of NXP after failing to gain regulatory approval in China. Richard Clemmer (pictured), NXP’s president, described this as “unfortunate”.
 
The company first made its takeover bid nearly two years ago and the combined company would have become one of the major electronics players, especially in the IoT and automotive arenas.
 
Since what was then a $47bn takeover bid in late 2016, the two technology giants have been seeking regulatory approval around the world and succeeded in all countries except China. Qualcomm has now had to pay a termination fee of $2bn to NXP.
 
While both firms are disappointed that the merger will not happen, NXP is confident it can thrive on its own.
 
“While it is unfortunate that the semiconductor powerhouse that would have resulted from the transaction with Qualcomm could not close after 21 months of diligent efforts by the team, we are confident in our future as an independent market leader and will continue to focus our efforts to drive our long-term strategy in our leadership markets of automotive and secure IoT,” said Clemmer, NXP’s president and CEO. “Our strategic preparation has us more convinced about the opportunity from our key focus areas.”
 
He said that consistent with the Dutch company’s historic policy of returning excess cash to shareholders, the NXP Board of directors had authorised a $5bn share repurchase programme based on the strength of the NXP capital structure, and its confidence in the company’s ability to drive long-term growth and strong cash flow.
 
Steve Mollenkopf, CEO of Qualcomm, added: "Our core strategy of driving Qualcomm technologies into higher growth industries remains unchanged. We will continue to focus on our strong momentum in these growth industries with projected revenues of approximately $5bn for fiscal year 2018, up greater than 70 per cent from fiscal year 2016. We believe our technology leadership and disciplined execution will drive significant value creation for our stockholders."
 
Qualcomm also announced that its board of directors authorised a stock repurchase programme of $30bn, which replaces the company's existing $10bn stock repurchase authorisation. Qualcomm expects to execute the majority of the stock repurchase programme prior to the close of fiscal year 2019.
 
Qualcomm says it continues to achieve strong growth, accelerated by its expansion and momentum in the areas of IoT, automotive, RF front end, compute and networking:

  • IoT: Qualcomm in IoT had more than $1bn in revenue in fiscal year 2017. The company has developed an indirect channel to reach more than 9000 customers through third parties, including more than 25 global distributors.
  • Automotive: Qualcomm is poised to deliver connectivity and intelligence capabilities for the connected car. As of July 2018, its backlog of awarded design wins is $5bn, up from $3bn in January 2018.
  • RF front end: Qualcomm's RFFE product has secured design wins with top-tier smartphone manufacturers in addition to securing non-binding memorandums of understanding with a contract value of $2bn with OEMs Lenovo, Oppo, Vivo and Xiaomi.
  • Compute: Qualcomm says it is redefining the connected PC experience with launches from Asus, HP and Lenovo based on the Qualcomm Snapdragon 835 mobile platform.
  • Networking: Qualcomm's technology is being used in home and enterprise wireless networks and in mesh wifi.
Qualcomm said it continued to lead in 5G and expected to see significant short- and long-term opportunities as the next wave of cellular technology transformed industries. These opportunities are helping increase the size of Qualcomm's serviceable addressable market to $100bn.