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Qualcomm
Inc.
decision to abandon the takeover of
NXP Semiconductors
NV produced a manna of money for the Dutch chip maker, but had to scramble to spell out what its future might hold.
Qualcomm late Wednesday has left the $ 44 billion deal the government has not given its blessing to the takeover amid trade tensions with the United States
NXP is expected to collect a $ 2 billion break-up fee but the President and Chief Executive Officer
Richard Clemmer
Thursday called the result "unfortunate" after such an extended process. "We are confident in our future as an independent market leader," he said, posting results in the second quarter.
The company has attempted to appease investor anxiety by announcing a $ 5 billion share buyback. However, NXP is a business with a plan.
Since the announcement of an agreement in October 2016, NXP has stopped providing financial forecasts and holding quarterly conference calls with badysts. Mr. Clemmer exercised options and sold more than $ 400 million of NXP shares last fall while he was trading around $ 113. On Wednesday, they traded at $ 98.37.
NXP Chief Financial Officer
Daniel Durn
left a year ago for the same role at the rival semiconductor manufacturer
Applied materials
Inc.
"You worry about losing the right people," said
Stacy Rasgon,
an badyst at Bernstein Research, adding that NXP "probably needs a new management team."
NXP plans to inform investors about its second quarter results on Thursday and said it would provide additional details on its plans at a forthcoming meeting with badysts
NXP, however, must face the reality that the markets in which it competes are changing. Based in a leafy office park in the small city of Eindhoven, The Netherlands, NXP is the world's leading manufacturer of chips used in cars, particularly for infotainment systems and sensors. It also manufactures chips for identification and transit cards. In 2017, it posted sales of $ 9.3 billion and net income of $ 2.2 billion.
But the prospect of a growth of autonomous car fleets has led to other chip makers in the automotive sector.
Intel
Corp.
last year agreed to buy Mobileye NV of Israel to expand its expertise in helping self-driving vehicles on the roads.
Samsung Electronics
Co.
in late 2016 agreed to buy the US automotive technology provider Harman International Industries Inc.
NXP could find itself marginalized. "A big part of what they sell are sensors and peripherals and infotainment-type stuff, but in the long run the premise is that the car will become more like a computer, and NXP will not. "No expertise today," said Tore Svanberg, an badyst with Stifel Nicolaus. He said that Qualcomm has this know-how, but not the automotive industry relationships that NXP has, which makes the wedding attractive.
NXP declined to comment on this article.
The activist investor Elliott Management Corp. last year and pushed Qualcomm to offer a higher price for the Dutch company, arguing that the recovery objective promised strong earnings growth. Elliott could not be reached immediately for comment.
The good news for NXP, according to badysts, is that its business is profitable, even without the $ 2 billion break-up fee. This gives NXP the strength to grow as a stand-alone company while allowing it to consider future acquisitions.
"It will be a perfectly perfect autonomous enterprise," Rasgon said. Write to Stu Woo at [email protected]
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