Qualcomm elects board for different future after Trump's intervention
Qualcomm's investors re-elected the chipmaker's board at a shareholders' meeting that would have been dramatically different had the largest proposed acquisition in technology industry history not been stopped.
Ten directors, including chief executive officer Steve Mollenkopf, were elected unopposed on Friday at a meeting in San Diego rescheduled in the midst of Qualcomm's successful four-month effort to fight off a hostile takeover by Broadcom.
The results are preliminary with a full tally due in a few days, chairman Jeff Henderson said at the meeting.
The world's largest maker of chips for mobile phones is struggling with the fallout from the proposed acquisition, which was blocked earlier this month by an executive order from US President Donald Trump, citing security concerns.
Broadcom appeared ready to seize control of the board and overturn Qualcomm's opposition to its rival's $117bn (€94bn) acquisition offer before the White House action.
Even with Broadcom's bid derailed, Qualcomm faces the same issues that have driven down its stock and made it a target - costly legal battles with regulators and key customer Apple over the chipmaker's lucrative licensing business and the loss of market share for its products. Henderson said directors are aware of the unease among shareholders after talking with many of them during the Broadcom fight.
"We appreciate your candid feedback," he said on Friday. "We have heard you loud and clear."
One investor at the meeting asked the management team how they planned to push the share price back up to the $80 range where it once traded. The shareholder also asked for more cash to be returned to investors.
"We've been faithful and we voted for you," he said. "How about a little of that loot?"
When told the company's overseas cash was already committed to an acquisition, he wasn't impressed, provoking widespread laughter with his follow-up comment.
"That doesn't sound very close to $80," he said.
Broadcom looked in a position to win a majority of Qualcomm's board seats, according to information obtained by Bloomberg two days ahead of the meeting, originally scheduled for March 6, based on a count of more than half of the votes cast.
Mollenkopf and chairman Paul Jacobs were among the lowest vote-getters at that point. Friday's final vote count will be announced later. Jacobs was stripped of the chairman's role during the Broadcom fight and Qualcomm withdrew his nomination when he said he was seeking to take the company private.
Mollenkopf, Jacobs and the board had argued that Qualcomm was stronger as a stand-alone company and would boost earnings as new wireless technology comes to market, it expands into new areas and the legal issues dogging its licensing business are resolved.
Shareholders who have seen the stock underperform will now focus on whether management lives up to the promises that Mollenkopf repeated again last Friday.
The most immediate issue is the delay of Qualcomm's purchase of NXP Semiconductors, which has dragged on through regulator scrutiny for more than a year and is still being looked at by Chinese authorities. NXP is crucial to Qualcomm's plan to diversify its sources of revenue into automotive chips.
The company remains confident it can complete the transaction, Mollenkopf told shareholders. It held talks earlier this week with Chinese officials and the remedies being asked for are broadly similar to those demanded by European regulators before they signed off, said Don Rosenberg, Qualcomm's general counsel.
Some of the developments in China currently are predictable, while others are "somewhat opaque," he said.
Hanging over the company is its licensing dispute with Apple. The two are locked in a web of lawsuits that make take years to resolve. Apple's decision to withhold its payments is costing Qualcomm about $2bn a year in revenue.
Regulators also have fined the company after accusing it of abusing its market-leading position in mobile chips. Qualcomm argues that it will overturn those decisions and get Apple to pay by winning in court over time.
The key legal fight with Apple is still in the discovery stage and the trial will begin as early as this autumn, Rosenberg said.
The chipmaker is unique in the industry in that it gets the majority of its profit from licensing technology. The company owns patents that underpin the fundamentals of all modern high-speed data mobile phone systems, meaning it gets a royalty for every smartphone sold, regardless of whether a device uses Qualcomm's chips.
Investors say the legal fights create too much uncertainty in modelling its earnings, causing a drag on the stock price. Jacobs, son of company founder Irwin Jacobs and its former chief executive officer, is exploring a way to take Qualcomm private, a move that would remove it from the short-term scrutiny of being a public company. Jacobs' effort to raise the more that $120bn needed may prove difficult.
Jacobs addressed the meeting as a director for the last time without mentioning his pending attempt to buy it. He focused his comments on Qualcomm's history of achievements in technology and expressed gratitude to his father, employees and the board. He received a round of applause from the audience in the 400-person auditorium in Qualcomm's main building.