Part of the Qualcomm strategy is a $1 billion in cost reductions
Qualcomm leaders are reaching out to shareholders ahead of a March 6 annual meeting to make the case for keeping the existing board of directors in place. Last year Broadcom made an unsolicited, $130 billion buyout bid for Qualcomm, which was rejected by Qualcomm’s board. After that Broadcom signaled its intention to nominate 11 new directors, replacing the current board, at the March shareholders session.
In a Jan. 16 letter to shareholders, Qualcomm’s board made the case for rejecting the Broadcom bid, which was characterized as a “transfer to a hostile acquirer the considerable near- and long-term value creation Qualcomm has in front of it. [Broadcom] is attempting to acquire Qualcomm at an opportunistic, inferior price by installing a slate of conflicted Broadcom/Silver Lake nominees with minimal relevant experience.”
Qualcomm laid out what it sees as five key problems with the proposed takeover:
- “It dramatically undervalues” the company “and does not reflect our clear path to near term value;”
- The necessary regulatory approvals could take more than a year “and may require complex divestitures or operating restrictions making clearance difficult, if not impossible, to obtain.”
- The monetary considerations don’t take into account Qualcomm’s strong position related to 5G;
- Broadcom’s proposed board members, coupled with the potential regulatory timeframe, create “significant oversight risk relative to Qualcomm’s experienced and capable board;”
- And, “It is designed to benefit only Broadcom stockholders.”
In terms of Qualcomm creating near term value, the letter to shareholders calls out the planned $1 billion in cost reductions–details of that aren’t available just yet; coming to an agreement with Apple, which is the subject of litigation regarding use of Qualcomm intellectual property; and “continued growth in our core business.”
As to 5G, the 3GPP adopted a non-standalone 5G New Radio specification next month and is working toward a mid-2018 standalone specification. Operators around the world are aggressively laying the groundwork for a rapid commercialization of 5G in the 2019 timeframe, which comes with new revenue opportunities related to both consumer- and enterprise/industrial-facing customers.
From the letter, “Qualcomm is 12-24 months ahead of our merchant competitors in the transition to 5G. We have already partnered with many companies to bring 5G to market, including Verizon, AT&T and mutliple operators globally. We are the partner of choice for infrastructure vendors such as Ericsson, Nokia, Samsung and others. All OEMs and operators working to bring 5G to the market are working with Qualcomm.”
