China flexes muscle by sacrificing $ 44 billion

Qualcomm has acknowledged its defeat in its attempt to buy Dutch chip maker NXP for $ 44 billion, after failing to get approval from Chinese regulators for what would have been the largest takeover of the semiconductor industry.

The companies' agreement expired shortly before midnight in New York on Wednesday without any indication that they had obtained antitrust clearance from Beijing, despite the agreement obtained approval from eight other regulators in the world.

After being protected by the Trump administration from Broadcom's hostile approach four months ago, Qualcomm became the most publicized American victim of the US-China trade war. China's inaction on regulatory approval has been seen as a retaliatory measure against President Donald Trump's tariffs on Chinese imports.

The collapse of the deal could also prove costly for the hedge funds that had accumulated in NXP in recent months, and now own more than one. third of his actions.

Steve Mollenkopf, General Manager of Qualcomm, acknowledged his defeat on Wednesday after a two-year effort to end the NXP game. Instead, he announced a $ 30 billion stock repurchase program.

"We intend to terminate our purchase agreement to acquire NXP when the agreement expires at the end of the day today, pending significant new developments ", said Mr Mollenkopf Wednesday afternoon. He added: "The decision for us to go ahead without NXP was difficult … At the very least, the 21 months since the announcement of the NXP acquisition have been volatile. "

M. Mollenkopf said that Qualcomm finally decided that there was no "high probability" of a short-term change in the current geopolitical environment. "This would allow the deal to close.Qualcomm plans to complete a" vast majority "of its $ 30 billion stock repurchases by the end of its 2019 fiscal year, next September.

The company also released results on Wednesday that were "well above our expectations." Revenues rose 6 percent to $ 5.6 billion, ahead of Wall Street estimates, with rising net income from 41% to $ 1.2 billion.) Qualcomm shares have jumped 6% after trading hours.

And the company has revealed a long-awaited news about its call for badysts: Apple's no Will not use its modems in the next generation of iPhones, amidst legal battles between the two companies.

"We believe that Apple intends to use only the modems of our competitors, rather than our modems, in its next release iPhone, "said George Davis, Qualcomm's CFO. "We will continue to provide modems for older Apple devices."

Prior to the close of trading on Wednesday, Qualcomm's stock had been 10% lower than its level of early 2018, when it had been backed by Broadcom's bid. . Mr. Trump's blocking of the offer in March for reasons of national security marked an unprecedented White House intervention.

Qualcomm's profits were affected by its vast legal battle with Apple over royalties. The Apple trial began in January 2017, just months after the NXP agreement in October 2016.

M. Mollenkopf will now be under pressure from Qualcomm's investors to show how the San Diego-based chip maker can diversify. smartphone chips in "the internet of things" without the anticipated impetus from NXP, which has greater activity in the automotive and security industries.

Geoff Blaber, an badyst at CCS Insight, said the resolution of the long NXP saga was a "good thing" for Qualcomm's investors because it offers "increased certainty".

"At some point you have to go out and run the business.You can not wait for anything indefinitely," Blaber said. However, the need for business diversification remains. "This deal was about [the internet of things] and the reality is that IoT is growing, but relatively modest in Qualcomm's business."

Qualcomm's bid for NXP rose from $ 110 to $ 127.50 per share in February as pressure from activist investors, was due to expire just before midnight Eastern time on Wednesday. NXP shares extended their decline after hours of trading after Qualcomm said it did not continue the recovery, slipping to around $ 96 – above a low success in May as the deal fell in doubt. The failure of the transaction will result in a $ 2 billion break-up fee that Qualcomm will have to pay immediately to NXP.