Qualcomm Rejects Split Idea

Qualcomm’s board rejected the idea of breaking itself up. I think that was the wrong decision.

Qualcomm Inc. rejected calls to split, betting that keeping its chipmaking and patent licensing business together is the best formula for turning around an earnings slump and stock drop.

Qualcomm also updated the outlook for its fiscal first quarter ending this month, saying it may “modestly” exceed its prior profit forecast.

Following a review of the “benefits and challenges of the existing structure,” the mobile chipmaker’s board and management decided, as anticipated, not to separate the two arms of the company.

“We have a focused plan in place that we believe will drive growth and we are off to a good start implementing that plan,” said Chief Executive Officer Steve Mollenkopf. “The strategic benefits and synergies of our model are not replicable through alternative structures.”

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Qualcomm’s decision contrasts with other technology companies that have split this year. Hewlett Packard became two entities in November, EBay Inc. split with payments unit PayPal and Yahoo! Inc. is separating itself from its stake in Alibaba Group Holding Ltd. to return the asses to shareholders without incurring taxes.

The decline in Qualcomm’s stock price has pushed its market value to about $70 billion, compared with a peak of more than $130 billion in 2014, when it surpassed Intel Corp. to become the biggest U.S. publicly traded chip company. Talk of a split was rekindled earlier this year by activist investor Jana Partners LLC, which bought up stock in the company. Jana signed off on the strategic review, which was initiated in July and included a 15 percent employee reduction and a shakeup of the board.

The stock is up about 2.6% today.

Posted by on December 15th, 2015 at 10:24 am


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