Shareholders Jana Partners calls for spin-off of chip business
Qualcomm is facing pressure from one of its largest shareholders to split up some of its most profitable divisions.
The world’s largest smartphone processor manufacturer has come under fire from activist investor Jana Partners, which owns a $2bn stake in the company, and is calling for a spin-off of its lucrative Snapdragon chip-making business.
Jana hopes that this move will help improve Qualcomm’s stock price, which has fallen around 11 percent over the past year, according to recent results.
Set to split?
The Wall Street Journal revealed that the suggestion is included in a letter being sent to Jana investors today as part of a wider-ranging plan to cut costs. The company also wants Qualcomm to consider accelerating stock buybacks and make changes to its executive pay structure, financial reporting and board of directors, the WSJ claimed.
“Qualcomm welcomes input from our investors and has a track record of active engagement with stockholders,” a Qualcomm spokeswoman said. “The board and management team will continue to consider actions that are in the best interests of all stockholders.”
Jana, which holds around $11bn worth of investments around the world, first began discussions with Qualcomm regarding such a move last January, describing the talks as ‘constructive’ in today’s letter.
However, Qualcomm has previous in this area, having previously decided to break up the company in 2000 before later calling off the plan the next year
The company even went so far as to file a registration statement confirming its intent to spin off its chip business in a tax-free distribution to shareholders, a move which would have helped it reduce conflicts in situations where the company sought to license patents to hardware rivals.
Founded in 1985, San Diego-based Qualcomm provides mobile processors for many of the world’s leading smartphones, and also builds other hardware for a wide range of sectors, including the modems used in Apple’s iPhones.
The company announced first quarter revenues of $7.1bn back in January, as demand for its hardware grew throughout many key regions. The company also announced a $15bn stock buyback announced last month, $10bn of which is set to be repurchased over the next 12 months.
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