Qualcomm board is reelected, but its problems aren’t solved
Qualcomm Inc.’s investors reelected the San Diego chip maker’s board Friday at a shareholders meeting that would have been dramatically different had the largest proposed acquisition in technology industry history not been stopped.
Ten directors, including Chief Executive Steve Mollenkopf, were elected unopposed at a meeting in San Diego, which was rescheduled in the midst of Qualcomm’s successful four-month effort to fight off a hostile takeover by Broadcom Ltd.
The world’s largest maker of chips for mobile phones is struggling with the fallout from the proposed acquisition, which was blocked this month by an executive order from President Trump, who cited security concerns. Before Trump’s order, Broadcom appeared ready to seize control of the board and overturn Qualcomm’s opposition to its $117-billion acquisition offer.
Even with Broadcom’s bid derailed, Qualcomm faces the same issues that have driven down its stock and made it a target: costly legal battles with regulators and key customer Apple Inc. over the chip maker’s lucrative licensing business, and the loss of market share for its products.
Two days before the originally scheduled March 6 shareholders meeting, based on a count of more than half the votes cast, Broadcom looked in position to win a majority of Qualcomm’s board seats. Mollenkopf and Chairman Paul Jacobs were among the lowest vote-getters at that point. (Friday’s final vote count is to be announced later.) Jacobs was stripped of the chairman’s role during the Broadcom fight, and Qualcomm withdrew his nomination when he said he was seeking to take the company private.
Mollenkopf, Jacobs and the board had argued that Qualcomm was stronger as a stand-alone company and would boost earnings as new wireless technology comes to market, it expands into new areas and the legal issues dogging its licensing business are resolved. Shareholders who have seen the stock underperform will now focus on whether management lives up to the promises that Mollenkopf repeated Friday.
The most immediate issue is the delayed closure of Qualcomm’s purchase of NXP Semiconductors, which has dragged on through regulatory scrutiny for more than a year and is still being looked at by Chinese authorities. Netherlands-based NXP is crucial to Qualcomm’s plan to diversify its sources of revenue into automotive chips.
Hanging over Qualcomm is its licensing dispute with Apple. The two are locked in a web of lawsuits that may take years to resolve. Apple’s decision to withhold its payments is costing Qualcomm about $2 billion a year in revenue. Regulators also have fined Qualcomm after accusing it of abusing its market-leading position in mobile chips. Qualcomm argues that it will get those decisions overturned and get Apple to pay by winning in court.
The chip maker is unique in the industry in that it gets the majority of profit from licensing technology. The company owns patents that underpin the fundamentals of all modern high-speed data cellular phone systems, meaning it gets a royalty for every smartphone sold, regardless of whether a device uses chips Qualcomm manufactured.
Investors say the legal fights create too much uncertainty in modeling its earnings, causing a drag on the stock price. Jacobs, son of company founder Irwin Jacobs and its former chief executive, is exploring a way to take Qualcomm private, a move that would remove it from the short-term scrutiny of being a public company. Jacobs’ effort to raise the more than $120 billion needed may prove difficult.
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