Dutch Chip Maker Is Back at Square One -- WSJ
27 Luglio 2018 - 09:02AM
Dow Jones News
NXP Semiconductors is back at square one after Qualcomm gives up
on acquisition
By Stu Woo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 27, 2018).
NXP Semiconductors NV Chief Executive Rick Clemmer got the text
message Wednesday evening. It was Qualcomm Inc. CEO Steve
Mollenkopf, thanking him for working together even as the U.S. chip
maker was about to abandon its nearly two-year-old $44 billion bid
to buy NXP.
Mr. Clemmer, who was visiting company offices in Austin, Texas,
didn't respond until 3 1/2 hours later at 12:01 a.m. Eastern time.
He had a smidgen of hope that Chinese regulators would approve the
merger by the midnight deadline Qualcomm had set.
The green light never came. Now Mr. Clemmer must plot a new
future for NXP, a Dutch business that makes computer chips for
automobiles, as a stand-alone company.
"We were prepared for this," Mr. Clemmer said in an interview
Thursday. "We were very confident about the transaction closing
until a few months ago. We realized it was a flip of a coin."
The companies announced their deal in October 2016, but it
became entangled in the U.S.-China trade feud. NXP's consolation
was a $2 billion breakup fee, which it had received by Thursday
morning.
It will use the funds quickly. To ease investor anxiety, NXP on
Thursday announced a $5 billion share buyback.
The most immediate challenge, though, could be to assure
shareholders that NXP has a plan for what it does next. Mr. Clemmer
said NXP missed out on business opportunities during its 21 months
in limbo, and analysts wonder whether the company's senior
management is fully engaged.
Mr. Clemmer exercised options and sold more than $400 million of
NXP shares last autumn when the stock was trading around $113. On
Thursday, shares traded at around $91. NXP Chief Financial Officer
Daniel Durn left a year ago for the same role at rival
semiconductor company Applied Materials Inc. NXP brought back a
previous finance chief as a replacement.
"You worry about losing the good people," said Stacy Rasgon, an
analyst at Bernstein, adding that NXP "likely needs a new senior
management team."
In a conference call with analysts Thursday, Mr. Clemmer said he
and his team were indeed engaged. He said NXP has plenty of room to
grow, but didn't answer some specific questions. "You have to give
us time," he said. His most definitive pronouncement was that NXP
would focus on its own business. "I don't think you'll see us try
to do any big merger," he said.
NXP must also confront the reality that the markets it competes
in are changing. Based in a leafy office park in Eindhoven, the
Netherlands, NXP is a leading maker of chips used in cars,
especially for infotainment systems and sensors.
It also makes chips for identification and public-transit cards.
On Thursday, NXP reported its second-quarter profit rose 10% from a
year earlier to $54 million, while revenue climbed 4% to $2.3
billion.
However, competition to supply the automotive sector with chips
is increasing. Intel Corp. last year agreed to buy Israel's
Mobileye NV to boost its expertise in self-driving vehicles, while
Samsung Electronics Co. in late 2016 agreed to buy U.S. automotive
technology provider Harman International Industries Inc.
NXP could find itself marginalized. "A lot of what they sell are
things like sensors and peripherals and infotainment-type stuff,
but in the long run the premise is the car will become more and
more like a computer, and NXP doesn't that have expertise today,"
said Tore Svanberg, a Stifel Nicolaus analyst. He said Qualcomm has
that know-how, but not the auto-industry relationships that NXP
has, which made the marriage attractive.
Mr. Clemmer told analysts Thursday that NXP could still partner
with Qualcomm.
The chief executive said he and his finance chief spent
Wednesday at NXP's Austin office to be in the same time zone as
many of its investors. Mr. Clemmer received the text from
Qualcomm's Mr. Mollenkopf after the California-based company said
in the late afternoon that it planned to abandon the bid by
midnight, barring 11th-hour Chinese approval.
In the evening, Mr. Clemmer said he spoke to the sales team in
Austin about how to retain and reassure customers who were excited
about the Qualcomm deal. The minute after the deal was officially
abandoned, he responded to Mr. Mollenkopf.
"Many thanks for the kind words," he wrote. "I'm sorry that we
didn't have a chance to work together."
Write to Stu Woo at Stu.Woo@wsj.com
(END) Dow Jones Newswires
July 27, 2018 02:47 ET (06:47 GMT)
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