Qualcomm Said to Explore Takeovers as Chipmakers Consolidate

Updated on
  • Company said to consider NXP among several large acquisitions
  • Also held preliminary talks with Xilinx, did not progress

Qualcomm Inc. has held early talks with several potential targets, including NXP Semiconductors NV, according to people familiar with the matter, as it seeks acquisitions to strengthen its position in a rapidly consolidating industry.

NXP is among companies that Qualcomm, the largest maker of chips for mobile phones, has been studying, the people said, asking not to be identified as the matter isn’t public. It’s also considered a handful of other large acquisitions -- of both domestic and international targets -- in recent months, the people said.

The chipmaker is under pressure from shareholders who want the company to put its industry-leading $30 billion of cash to work, said a person familiar with the considerations. Management hasn’t yet decided whether to stick with its policy of smaller acquisitions to plug gaps in technology or to pursue a large deal that would transform the company, the person said.

Qualcomm held preliminary takeover talks with Xilinx Inc. earlier this year, the people said. Those discussions didn’t progress, and there’s no guarantee Qualcomm will proceed with any prospective deal now, they said.

Representatives for Qualcomm, NXP and Xilinx declined to comment.

Qualcomm has largely sat on the sidelines as other chipmakers acquired each other through 2015, making it the biggest year ever for industry consolidation. The rush of dealmaking has continued in 2016: Japan’s SoftBank Group Corp. agreed in July to pay about $32 billion to buy Cambridge, U.K.-based ARM Holdings Plc, while Analog Devices Inc. will acquire Linear Technology Corp. for about $14.8 billion.

Shares of both Qualcomm and Eindhoven, Netherlands-based NXP jumped Thursday after the Wall Street Journal reported that the companies are in talks about a deal that could be agreed within two to three months. Qualcomm has a market valuation of about $102.6 billion, while NXP is valued at about $35.4 billion. Both stocks gained again Friday with Qualcomm rising 2.3 percent to $69.04 and NXP jumping a further 6.7 percent to $102.56. Xilinx shares rose as much as 3.7 percent to $55.49.

Combining with NXP would create a company with technology that would place it at the center of the growing push to bring more electronics and automation to cars, according to Vijay Rakesh, an analyst at Mizuho Securities. He upgraded his rating on Qualcomm to buy and is predicting the stock will rise to $75.

“We believe a deal here makes significant strategic and financial sense,” he wrote. “The move to automotive transforms the narrative on Qualcomm from handsets to automotive, a secular growth roadmap with connectivity, mobility, and services platforms.”

After rejecting calls to split its semiconductor and licensing units at the end of last year, Qualcomm’s chief executive officer signaled in February that the San Diego-based company is on the lookout for businesses and technologies that will strengthen its position in smartphones and speed its entry into new markets.

“We maintain our balance sheet so that we can take advantage of the environment in the industry today,” Steve Mollenkopf said in a presentation to investors at the company’s headquarters at the time.