Qualcomm, a major chips manufacturer and patents holder, has been under a lot of pressure to split itself into two major divisions – notably the chip manufacturing unit and the licensing unit, which holds a lot of patents including CDMA and LTE. This move of a break-up to improve the valuation of the company was suggested by hedge fund Jana Partners. Qualcomm’s president Derek Aberle agreed with Jana that the shares have seen a 25 percent decrease over the past year, and the stocks are devalued, but he sounded cautious about a break-up also noting that the board and management do not expect to complete a review of the potential company split before the coming of 2016.
Jana Partners, who had disclosed more than $2 billion in holdings to Qualcomm back in April, had spearheaded a public campaign, claiming that the chip-manufacturing unit of Qualcomm is essentially worthless devaluating the whole company, and has been pressuring Qualcomm to split ever since. Aberle noted that investors were applying a ‘sum of the parts’ analysis, which effectively means that Qualcomm’s two divisions, of licensing, and chip-making would be much more valuable as independent companies. He was afraid that it was too simplistic of an analysis and was doubtful as to whether it would actually solve the main issues causing the devaluation. He also mentioned that Qualcomm’s current position will easily allow the company to partner with various Chinese clients and help expand them beyond China. Although he agreed that the two divisions were causing some serious conflict with customers, he quickly added in his defence that the company handled the conflicts efficiently.
According to Aberle, Jana did not pressure them into a split, and only proposed it as an alternative. A lot of things they proposed were already on the company’s checklist as discussed with their shareholders. Qualcomm had announced in July that they’d reduce cost by about $15 billion, by cutting off 15 percent of their workforce, and boost capital returns. He also added that they are working on adding an independent third member to the board, in addition to the two they have already added, but declined to name them.