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Qualcomm CEO gave two years to diversify business and settle disputes with Apple and Huawei

Jul 27, 2018, 5:30 am

Qualcomm Inc Chief Executive Officer Steven Mollenkopf sought the government’s help to block an acquisition of the U.S chip maker. But now, he has to find a way to expand Qualcomm’s chip offerings in other sectors such as automobiles, internet connectivity and network processing on its own. Several Qualcomm shareholders have given him two years to show that he can diversify the company’s business and settle disputes with Apple Inc and Huawei Technologies Co Ltd.

Earlier this year, Qualcomm asked the Committee on Foreign Investment in the United States to review a bid of $121 billion for Qualcomm by Broadcom Ltd., U.S President Donald Trump blocked the deal in March over the concern for Chinese dominance in 5G wireless technology.

However, China responded to this by stalling the antitrust review of Qualcomm’s $44 billion acquisition of NXP Semiconductors NV. NXP was expected to help Qualcomm expand their business by reducing their dependence on the smartphone market. But Qualcomm let the merger agreement expire and they had to pay a $2 billion breakup fee. Thus, US-China spat kills Qualcomm’s biggest deal.

Qualcomm has a lot to prove and the markets are not giving it the benefit of the doubt” without NXP. Mollenkopf is still hopeful that big acquisitions would again be possible after the trade tension between the U.S and China passed. A Qualcomm spokeswoman said the company’s earnings demonstrated “that the execution of the company has been very strong in a period of great distraction. – Neuberger Berman associate portfolio manager Shawn Trudeau

When Mollenkopf became CEO, Qualcomm’s stock was still below $76.00 level and way below the $82 per share offer from Broadcom. This puts Mollenkopf under more pressure. “We obviously got caught up in something that was above us, so I don’t know if I would conclude anything about our own business, our ability to invest [in China] or partner with Chinese companies,” Mollenkopf said.

His immediate challenge is meeting Qualcomm’s goal for up to $7.50 in adjusted earnings per share by fiscal 2019, compared with $4.28 in fiscal 2017. It mainly concerns itself with settling the dispute with Huawei and Apple. This year, Mollenkopf expects Qualcomm’s non-mobile revenue to hit $5 billion, or about 22 percent of the $22 billion in overall revenue at the low end of the company’s guidance.

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