Qualcomm Gives Up On NXP After China Refuses Cooperation

Qualcomm on Thursday officially gave up on its attempted acquisition of NXP Semiconductors valued at $44 billion after the latest deadline for the deal expired following numerous extensions. The San Diego, California-based chipmaker failed to secure an approval from China's antitrust watchdog, with industry sources recently claiming Beijing was unwilling to cooperate due to the trade war recently started by the United States. All other competent regulators previously greenlit the deal which was originally announced in late 2016 and ended up being beefed by several billion as part of Qualcomm's strategy to defend against a hostile Broadcom takeover earlier this year. NXP will receive a $2 billion termination fee from Qualcomm as a result of the latest development.

Like previously promised, Qualcomm is now reallocating its resources toward other avenues of growth so as to offset the effect of the failed bid for Dutch NFC pioneer. To that end, the company's Board of Directors authorized $30 billion stock repurchase program which is replacing its $10 billion one that's been in force until today. The majority of the repurchase initiative will be completed in 2019, Qualcomm said. Reacquiring a significant portion of its stock will create some near-term value for Qualcomm investors but won't address the issue the NXP tie-up was meant to deal with - Qualcomm's extreme reliance on its licensing business. With NXP under its corporate umbrella, the firm would have diversified its operations to a large degree, creating new synergies and moving into emerging markets such as connected vehicles in a more prominent manner.

Qualcomm said its long-term strategy for generating extra shareholder value remains unchanged, though it remains to be seen how its stock value ends up being affected by the latest development. The company is unlikely to attempt major acquisitions in the near term and should continue pursuing R&D efforts in the 5G segment, as well as continuing to advance its mobile silicon technologies, though its licensing revenue could decline in the medium term as more major clients such as Apple continue pushing against its patent royalty rates.

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