Qualcomm Says NXP Deal on Track, As it Accelerates in Driverless Tech
October 17 2017 - 7:19PM
Dow Jones News
By Betsy Morris
LAGUNA BEACH, Calif. -- Qualcomm Inc. said its $39 billion
acquisition of NXP Semiconductors NV is on schedule to close by the
end of the year, paving the way for it to be a major player in
autonomous driving.
"We are still on track to close this year," Qualcomm Chief
Executive Steve Mollenkopf said in an interview on Tuesday at The
Wall Street Journal's WSJ D.Live tech conference. When asked about
speculation that the company might have to raise its price for NXP,
he said: "I don't think there's anything unusual regarding our
discussions." He said the company was focused on planning and other
aspects of the acquisition.
Since Qualcomm signing the deal for the Dutch semiconductor
maker a year ago, NXP's performance has been strong. That prompted
New York-based hedge fund Elliott Management Corp., which announced
in August it took a 6% stake in NXP, to say that the shares were
undervalued and raise questions about the terms of the tie-up.
But Mr. Mollenkopf sounded a rosy note about the deal for the
world's largest developer of chips for automobiles and how it will
position Qualcomm for the arrival of autonomous vehicles. Mr.
Mollenkopf predicted the disruption caused by autonomous vehicles
will extend over the next 30 years and be as significant as the
smartphone. For all the current hype over autonomous vehicles, "we
are just starting to scratch the surface," he says. "The industry
isn't thinking far ahead enough in terms of connecting not just to
the cloud but to other cars."
He sees a big change in the architecture of the car with systems
and subsystems that will connect to each other and to the internet.
Qualcomm expects to be a big player, he says.
The shift to driverless technology is welcome for Qualcomm,
which is facing an international wave of regulatory and legal
challenges to its semiconductor business. Just this month, the chip
maker was fined by the Taiwanese government. Apple Inc. earlier
this year sued Qualcomm in federal court, arguing it unfairly
leverages its near-monopolistic position as a broadband chip maker
to charge unreasonably high patent fees.
Mr. Mollenkopf said the dispute is "fundamentally about pricing"
-- over the technology that makes the phone the phone. "I think
we'll get through it," he said, adding that Qualcomm has a strong
relationship with Apple. "For big companies, you sometimes have
these disputes but you have a broader relationship."
Still, the dispute has been harmful to Qualcomm. The chip maker
collects a royalty of roughly 5% on nearly every smartphone sold
world-wide. It says that since its patents relate to cellular
devices as a whole -- and not just its chips -- that allows it to
charge a percentage of the price of the entire device.
The company's licensees and rivals, though, say Qualcomm's
royalty rates are unreasonably high. Apple argues that Qualcomm's
practices allow it to benefit from unrelated technologies added to
the iPhone. The contract manufacturers who make the iPhone and iPad
began withholding Qualcomm's royalty payments for those devices
earlier this year.
The withheld payments hit Qualcomm hard in its most recent
quarter, triggering a 40% decline in profit from a year earlier.
The fight is shaping up to be a multi year battle that has spread
to overseas markets, including the United Kingdom, China, Japan and
Taiwan.
Write to Betsy Morris at betsy.morris@wsj.com
(END) Dow Jones Newswires
October 17, 2017 20:04 ET (00:04 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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