Qualcomm promised new cost reductions as part of a plan to boost profitability and stave off a hostile takeover bid from Broadcom.
In a message to investors on Tuesday (16 January), Qualcomm revealed it will increase shareholder earnings through a new $1 billion cost-cutting plan and focus on “value creation” from its NXP Semiconductors acquisition. The company added it is poised to “realise the value of Qualcomm’s leadership position in 5G,” which it said will transform industries beyond mobile including IoT and automotive.
By 2020, Qualcomm expects to address market opportunities worth $150 billion across its core mobile, RF front end, data centre and adjacent segments.
Despite facing licensing headwinds from disputes with Apple and others, Qualcomm CFO George Davis said in a video message the company is confident it can increase earnings, particularly if it closes a planned acquisition of NXP Semiconductors. In the event Qualcomm fails to close the deal, Davis noted it would use savings from tax reform to issue a large stock buyback which would deliver the same level of accretion.
The company, estimated it will generate revenue of between $35 billion and $37 billion in fiscal 2019: in fiscal 2017 it generated $22.3 billion.
“This is why we have rejected Broadcom’s attempt to acquire Qualcomm at an opportunistic and extremely low price, with a highly uncertain – perhaps impossible – regulatory path to completion,” the company noted.
Broadcom made an unsolicited $130 billion bid for Qualcomm in November 2017, which the latter’s board swiftly rejected for undervaluing the company. Broadcom subsequently launched an effort to oust the sitting board, appealing directly to investors.
Qualcomm urged shareholders to re-elect its incumbent board members to execute on near- and long-term growth opportunities rather than surrendering control to “conflicted Broadcom/Silver Lake nominees with minimal relevant experience”.