Qualcomm Inc, the world’s largest maker of chips for mobile phones, does not plan to sit on the sidelines as rivals get larger, chief executive officer Steve Mollenkopf said.
“Qualcomm is very likely to be some form of actor in the consolidation of the semiconductor industry,” Mollenkopf said on Tuesday in an interview at Bloomberg headquarters in New York. “The timing of which is always the debate.”
Qualcomm is set to examine acquisition opportunities as part of a sweeping strategic review the San Diego-based company announced last week. Activist hedge fund Jana Partners LLC, which owned 1.8 percent of Qualcomm’s outstanding shares as of March 31, has called for the company to review opportunities including potentially separating design from Qualcomm’s more profitable licensing business.
The company has come under pressure from investors as its grip over the smartphone industry slips and it heads for its first annual sales decline since the financial crisis hurt demand in 2009. Customers such as Samsung Electronics Co have started using their own chips. Separately, regulators in the EU, South Korea and the US are investigating Qualcomm’s business practices, raising concern that it might be forced to charge handset makers less for access to its technology.
Intel Corp’s US$17 billion deal for Altera Corp and Avago Technologies Ltd’s US$37 billion agreement to buy Broadcom Corp occurred while Qualcomm was trying to appease Jana by cutting costs and shaking up its board. Jana agreed to some standstill provisions, including that it would not speak publicly about Qualcomm’s plans, call shareholder meetings or increase its holdings in the chipmaker to more than 4 percent as the company conducts its review.
Mollenkopf declined to identify specific targets. He did say the company is focused on expanding outside of its mobile-phone business, including making chips for smart cars and healthcare services. He said the company is better positioned to take on larger acquisitions now that the licensing business is healthier after settling an antitrust lawsuit with China earlier this year.
“It’s an interesting time to be a scale player in the semiconductor industry, particularly from a position of strength,” Mollenkopf said. “We’ve had strategic flexibility, but it’s important that you have your home business well structured for the future first.”
Qualcomm is pointing to the increasing use of chips in vehicles and industrial equipment as a potential growth area for its products. While there has been a proliferation of devices connected to the Internet, there is no one area that comes close to the more than 1 billion smartphones shipped per year as an individual end market.
“It’s important for us to grow outside of the phone space,” Mollenkopf said. “The phone continues to be a good business, but it also provides the springboard to allow us to grow into new areas.”
For example, Qualcomm could consider buying Nvidia Corp or NXP Semiconductors NV to broaden its exposure into automobiles, Sanford C. Bernstein analyst Stacy Rasgon wrote in a note to clients on Friday last week.
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