New Pacts, IPO Climate Led Qualcomm To
Withdraw Spinoff
By BOB SECHLER
Of DOW JONES NEWSWIRES
AUSTIN, Texas -- Qualcomm Inc.'s (QCOM) recent chip licensing
agreements have lessened the need for it to spin off its semiconductor unit,
and the lackluster market for initial public offerings gives the company little
incentive to do so.
That was the reaction of several Wall Street analysts to Qualcomm's
announcement Tuesday that it has withdrawn the planned spinoff of its
integrated circuits and system software business, CDMA Technologies.
The announcement "has taken the market a little bit by surprise, but I think it
has been clear that they've been reconsidering the spinoff" for the past several
weeks, said Keith Bachman, an analyst with ABN Amro Inc. who has a hold
rating on Qualcomm.
Qualcomm shares were trading recently down 5%, or $3.05, at $57.80. In
addition to the announcement that the spinoff won't take place, the shares
were being hurt Tuesday by the resignation of Richard Sulpizio, Qualcomm
president and chief operating officer, just two days before the company
reports fiscal third-quarter earnings Thursday.
Qualcomm said in a statement that Sulpizio resigned to pursue personal
interests. Analysts chalked up his resignation partly to the fact that he was
due to become chief executive of the spun-off company, which now won't
take place, saying the resignation appears to have nothing to do with the
upcoming earnings.
Among other recent licensing agreements, Qualcomm reached a deal with
mobile-phone maker Nokia Corp. (NOK) earlier this month in which Nokia
will pay royalties for the use of Qualcomm technology.
Qualcomm's planned spinoff had been intended to allow its semiconductor unit
to gain better access, through cross-license patent agreements, to third party
intellectual property, thus reaching more potential customers and minimizing
the potential for patent litigation.
Qualcomm officials, in their statement Tuesday, said the spinoff isn't
necessary at the present time in light of the new licensing agreements,
although they said the company will "reconsider if conflicts arise that
adversely affect our ability to operate" the semiconductor business.
Analysts said the poor market for initial public offerings, combined with the
sagging valuations for semiconductor firms, also appears to have played a role
in the decision to scrap the spinoff.
"The fact is that valuations in the semiconductor sector have come down,"
Morningstar Inc. analyst Todd Bernier said. "Had they done this a year ago, at
the top of the market, they would have received a much higher valuation for
the business."
Briefing Book for: QCOM |
