Qualcomm split subject to Heisenberg

HeisenbergQualcomm appears to have added up the numbers and is fast reaching the conclusion that it is not quite, but is completely and utterly uncertain about hiving off its chipmaking arm.

The outfit was under pressure from its activist shareholders Jana to sell off its chipmaking side and concentrate on a more lucrative patent trolling business.

Qualcomm President Derek Aberle said he was still looking into it but said a review of a possible split will not be complete until the end of the year.

Aberle agreed with Jana that its stock is undervalued but was still not sure that spinning off Qualcomm’s two divisions was the answer.

“You have to step back and say why that is and would a separation solve whatever the underlying issues are that are creating the current valuation? You have to be careful that it’s not too simplistic an analysis.”

The company’s current structure allows Qualcomm to use its relationships with Chinese customers since the chipmaker is well positioned to help them expand to other countries.

Aberle acknowledged that having chip and licensing divisions created conflicts with customers, “but we manage it pretty well”.

Qualcomm was approached by Jana, a hedge fund which owns $2 billion in stock. Aberle said the outfit did not pressure Qualcom to pursue a breakup but rather wanted them to review a split as one option to unlock value.

It is also working on adding a third independent board member, whom Aberle declined to name. Qualcomm has already added two new board members in cooperation with Jana.

“A lot of the things Jana put on the table were very consistent with things we’d already been talking to our shareholders about and already been planning for a long time,” Aberle said.

Qualcomm said in July it would reduce costs by about $1.4 billion, cut about 4,500 full-time staff, or 15 percent of its workforce, and boost capital returns to shareholders.