Displaying items by tag: NXP

South Korea and EU approve Qualcomm’s acquisition of NXP

Written on Wednesday, 24 January 2018 13:35

Qualcomm announced that the European Commission and the Korea Fair Trade Commission (KFTC) have authorized the acquisition of NXP Semiconductors. The acquisition has now received 8 of the 9 approvals around the world, with China remaining.

Telecom Review reported in November 2017 that Qualcomm’s acquisition of NXP was set to receive European Union approval, after the company said it would maintain licensing terms for NXP’s MIFARE technology, used in swipe cards for the London tube system. Qualcomm also said it would commit to ensure NXP chips remain interoperable.

Qualcomm said in a statement that it has cooperated with the European Commission and the KFTC and agreed to all conditions required by the agencies to obtain their authorization. Qualcomm committed to exclude certain near-field communication (NFC) patents from the proposed transaction and ensure that NXP licenses those patents to third parties.

Qualcomm also committed not to assert the NFC patents it will acquire from NXP and maintain interoperability between Qualcomm’s baseband chipsets and NXP’s NFC chips and rivals baseband chipsets and NFC chips. Qualcomm also confirmed it will continue to offer a license to MIFARE on terms commensurate with those offered by NXP.

“We are pleased that both the European Commission and the Korean Fair Trade Commission have granted authorization of the NXP acquisition, and we are optimistic that China will expeditiously grant its clearance,” said Steve Mollenkopf, CEO of Qualcomm Incorporated.

“Acquiring NXP is complementary to Qualcomm’s global portfolio, providing tremendous scale in automotive, IoT, security and networking and will greatly accelerate our ability to execute and create value in new and adjacent opportunities,” Mollenfopf added.

The European Commission expressed concerns in 2017 about Qualcomm's acquisition of NXP - announced in October 2016 - that the tie-up could lead to increased prices and reduced innovation in the semiconductor industry. Qualcomm offered in October 2017 concessions to move forward with the deal, but both Qualcomm and NXP warned that it could be delayed due to regulatory scrutiny.

However, winning EU and Korean approval is a big boost for the proposed merger. It is significant for Qualcomm in its bid to fend off acquisition advances from Broadcom, after the company rejected Broadcom's $130 billion offer.

According to Bloomberg analyst Anand Srinivasan, getting approval from the EU will be a relief for Qualcomm, as adding an automotive chip business in the form of NXP gives "it a much bigger and more diverse empire to oversee." Srinivasan believes the addition of NXP to Qualcomm's portfolio could see it convincing investors that Qualcomm has the right strategy to avoid Broadcom's advances.

Qualcomm announced on November 13 that its Board of Directors had "unanimously" rejected the unsolicited proposal by Broadcom on November 6. Paul Jacobs, Executive Chairman and Chairman of the Board of Qualcomm Incorporated, said the proposal "significantly undervalues Qualcomm" relative to its leadership in mobile technology and future growth prospects.

Published in Telecom Vendors

Broadcom proposes to acquire Qualcomm for $130 billion

Written on Monday, 13 November 2017 12:30

US semiconductor firm Broadcom has proposed to acquire all of the outstanding shares of Qualcomm for per share consideration of $70 in cash – a transaction valued at $130 billion. The proposal was made on Nov. 6, and represents a 28 percent premium over the closing price of Qualcomm common stock on Nov. 2, the last unaffected trading day prior to media speculation of a potential transaction.

The Broadcom proposal stands whether Qualcomm's pending acquisition of NXP is consummated on the currently disclosed terms of $110 per NXP share or the transaction is terminated. The proposed transaction is valued at approximately $130 billion on a pro forma basis, including $25 billion of net debt, giving effect to Qualcomm's pending acquisition of NXP on its currently disclosed terms.

The proposal comes after Qualcomm recently posted discouraging financial results which were negatively impacted by its ongoing dispute with Apple. Qualcomm reported revenues of $5.9 billion for Q4 2017 compared to $6.2 billion in Q4 2016 – a 5 percent drop. Qualcomm has been hit by antitrust fines, such as an $868 million fine imposed by the Korea Fair Trade Commission in the first quarter, and more.

“Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company," said Hock Tan, President and Chief Executive Officer of Broadcom.

"This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products. We would not make this offer if we were not confident that our common global customers would embrace the proposed combination,” Tan added.

Qualcomm's cellular business is highly complementary to Broadcom's portfolio, and the combination will create a strong, global company with an impressive portfolio of technologies and products, the company said in a press release.

Broadcom also maintains that the combined company will have an enhanced financial profile, benefiting from Broadcom's operating model with “industry-leading margins”. The combined Broadcom and Qualcomm, including NXP, will have pro forma fiscal 2017 revenues of approximately $51 billion and pro forma 2017 EBITDA of approximately $23 billion, including synergies. 

“Following the combination, Qualcomm will be best positioned to build on its legacy of innovation and invention,” said Tan. “Given the common strengths of our businesses and our shared heritage of, and continued focus on, technology innovation, we are confident we can quickly realize the benefits of this compelling transaction for all stakeholders. Importantly, we believe that Qualcomm and Broadcom employees will benefit from substantial opportunities for growth and development as part of a larger company.”

Broadcom's proposal was unanimously approved by the Board of Directors of Broadcom. Broadcom said it’s prepared to engage immediately in discussions with Qualcomm to work toward a mutually acceptable definitive agreement and said it’s ready to devote all necessary resources to finalize the necessary documentation on an expeditious basis.

The proposed transaction will not be subject to any financing condition, the company said. BofA Merrill Lynch, Citi, Deutsche Bank, J.P. Morgan and Morgan Stanley have advised Broadcom in writing that they are highly confident that they will be able to arrange the necessary debt financing for the proposed transaction. 

Silver Lake Partners, which has served as a strategic partner to Broadcom in prior transactions, has provided Broadcom with a commitment letter for a $5 billion convertible debt financing in connection with the transaction. Broadcom expects that the proposed transaction would be completed within approximately 12 months following the signing of a definitive agreement.

“The Broadcom business continues to perform very well. Broadcom has completed five major acquisitions since 2013, and has a proven track record of rapidly deleveraging and successfully integrating companies to create value for our stockholders, employees and customers,” said Thomas Krause, Broadcom Chief Financial Officer.

“Given the complementary nature of our products, we are confident that any regulatory requirements necessary to complete a combination with Qualcomm will be met in a timely manner,” Krause added. “We look forward to engaging immediately in discussions with Qualcomm so that we can sign a definitive agreement and complete this transaction expeditiously.”

Published in Finance

Qualcomm’s Q4 results reflect ongoing dispute with Apple

Written on Thursday, 09 November 2017 09:54

Qualcomm Incorporated announced results for its fiscal fourth quarter and year ended September 24, 2017. The company reported revenues of $5.9 billion for Q4 2017 compared to $6.2 billion in Q4 2016 (5 percent drop). Qualcomm said the results were negatively impacted by its ongoing dispute with Apple.

The company also highlighted a previously disclosed dispute with another licensee, who underpaid royalties to Qualcomm due in the second quarter of fiscal 2017 and did not report or pay royalties due in the third and fourth quarter. Qualcomm said it expects the licensees will continue to take such actions in the future until the disputes are resolved.

Qualcomm Incorporated CEO, Steve Mollenfopf, remained positive, saying the results reflect “continued product leadership and profitability improvement in our semiconductor business, including strength in adjacent opportunities outside mobile.”

Mollenkopf said the company continues to see “strong growth trends for global 3G/4G device shipments and are focused on protecting the established value of our technologies and inventions. We are leading the industry to 5G and are well positioned with our product and technology leadership to continue our expansion into many exciting new product categories, such as automotive, mobile computing, networking and the Internet of Things.”

In addition to the Apple dispute, Qualcomm’s Q4 results were negatively affected by an $868 million fine imposed by the Korea Fair Trade Commission (KFTC) in the first quarter of 2017; as well as a $974 million reduction to revenues related to the BlackBerry arbitration decision in the second quarter; and a $778 million fine imposed by the Taiwan Fair Trade Commission (TFTC), which was accrued in the fourth quarter.

Also affecting Qualcomm’s results, during the fiscal year, the company deposited $2 billion to collateralize the letters of credit related to its proposed acquisition of NXP, which was recorded as other noncurrent assets at the end of the third and fourth quarters of fiscal 2017.

On October 27, 2016, Qualcomm announced a definitive agreement to acquire NXP Semiconductors N.V. for estimated total cash of $38 billion to be paid to shareholders. NXP is a leader in high-performance, mixed-signal semiconductor electronics in automotive, broad-based microcontrollers, secure identification, network processing and RF power products. The transaction is subject to receipt of regulatory approvals.

Published in Finance

The European Commission has opened an “in-depth” investigation to assess the proposed acquisition of NXP by Qualcomm under the EU Merger Regulation. The Commission has concerns that the transaction could lead to higher prices, less choice and reduced innovation in the semiconductor industry.

Commissioner Margrethe Vestager, in charge of competition policy, said: “We use our electronic devices every day - mobile phones or tablets. As semiconductors are used in practically every electronic device, we are dependent on them in those devices. With this investigation, we want to ensure that consumers will continue to benefit from secure and innovative products at competitive prices."

The proposed transaction involves the acquisition of the whole of NXP by Qualcomm and would combine two of the leading players in the semiconductor industry. More specifically, Qualcomm develops and supplies baseband chipsets (both standalone and integrated with an application processor) enabling cellular telecommunications standards such as UMTS and LTE. NXP is an important provider of semiconductors, in particular for the automotive industry. With respect to mobile devices, NXP is a leading provider of near-field communication ("NFC") chips and secure elements ("SEs").

The Commission's initial market investigation raised issues relating in particular to semiconductors used in mobile devices, such as smartphones, and in the automotive industry. The Commission is concerned that the merged entity would hold strong market positions within both baseband chipsets and NFC/SEs chips, and would have the ability and incentive to exclude their rival suppliers from these markets through practices such as bundling or tying.

The Commission is also concerned that the merged entity would have the ability and incentive to modify NXP's current intellectual property licensing practices, in particular in relation to NFC technology, including by bundling the acquired NFC intellectual property to Qualcomm's patent portfolio. The Commission will investigate whether such conduct could lead to anticompetitive effects, such as increased royalties for customers and/or exclusion of competitors.

The Commission claims the merger would remove competition between companies active in the markets for semiconductors used in the automotive sector and, in particular, in the emerging Vehicle-to-Everything ("V2X") technology, which will play an important role in the future development of "connected cars".

The transaction was notified to the Commission on 28 April 2017. The Commission now has 90 working days, until 17 October 2017, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

Published in Government

U.S. semiconductor maker Qualcomm recently announced a $47 billion mega-deal to buy Dutch rival NXP to extend its footprint into the Internet of Things and the automobile sector. A week later on November 2, chipmaker Broadcom announced a $5.9 billion deal to acquire computer network company Brocade Communications Systems, continuing the consolidation of the semiconductor industry.

Qualcomm’s announced purchase of NXP is said to be the biggest ever deal in the semiconductor market. The agreement, according to AFP, will give the company a much-needed boost due to falling mobile phone sales and stiff market competition. Eindhoven-based NXP is one of the leading manufacturers of chips for the auto industry, and also for contactless payment systems, hence Qualcomm’s interest in acquiring its assets.

Broadcom, which has operations in both California and Singapore, said in a released statement that it would hold on to Brocade's Fibre Channel SAN operations specializing in switches for high-speed networks and storage. Broadcom itself was acquired in 2015 by Singapore-based Avago Technologies in a $37 billion deal intended to create a mobile chip-making powerhouse. Avago was originally a semiconductor unit of U.S.-based Hewlett-Packard.

Broadcom reportedly plans to sell parts of Brocade. Chief executive Hock Tan said, “This strategic acquisition enhances Broadcom’s position. With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs" of customers, Tan added. Broadcom's board has signed off on the Brocade acquisition, which was expected to close early next year.

The two latest billion dollar acquisitions made by Qualcomm and Broadcom represent an intense consolidation of the semiconductor industry. Leading industry players have been eager to increase in scale and scope to prevail in an increasingly competitive market where costs have risen while sales have declined.

Published in Telecom Vendors