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Qualcomm's acquisition of NXP transaction is about the dust settles, while Qualcomm has been doing to prepare for the worst acquisitions: to pay huge break-up fee.
According to Qualcomm's offer to acquire NXP, the transaction will expire at 11:59 pm EST on July 25 (Beijing time, July 26, 2018, 11:59). Qualcomm said that if the M&A transaction is not approved by the Chinese regulatory authorities before the deadline, it is expected to terminate the transaction. But Qualcomm needs to pay NXP a 2 billion dollar break-up fee to end the largest 44 billion dollar M&A deal in the semiconductor industry.
Qualcomm released its third-quarter earnings for the 2018 fiscal year after the US stock market on Wednesday. According to financial data, Qualcomm's third-quarter revenue was 5.6 billion dollar, up 4% from 5.4 billion dollar in the same period last year; net profit was 1.219 billion dollar, a 41% increase from the net profit of 866 million in the same period last year.
It is reported that most of Qualcomm's revenue comes from the CDMA technology department that produces equipment chips such as mobile phones. Qualcomm CFO George Davis said in the earnings conference that the department’s performance reflects the “strong demand” of Chinese equipment manufacturers. Qualcomm’s patent business revenue was 1.47 billion dollar, higher than market expectations of 976 million dollar.
Qualcomm expects revenue for the next quarter to be between 5.1 billion dollar and 5.9 billion dollar, and is not in accordance with US GAAP. Diluted earnings per share is expected to be 75 cents to 85 cents. According to Thomson Reuters, analysts expect revenue for the quarter to be $5.45 billion and diluted earnings per share to be 76 cents.
In addition, Qualcomm also expects MSM chip shipments in the fourth quarter of FY18 to be between 205 million and 225 million, down 7% from the previous year's 2020 million to 2%; Revenue will range from 1 billion dollar to 1.2 billion dollar, down 1% to 18% from 1.2 billion dollar in the same period last year.
Qualcomm CEO Steve Mollenkopf said: "With the steady implementation, our announced results far exceed our expectations for the third quarter. After today's trading deadline, We intend to terminate the acquisition of NXP's transactions. In addition, as mentioned earlier, after the termination of the agreement, we intend to implement a stock repurchase program of up to $30 billion, which will bring great value to our shareholders."
At the financial report meeting on the day of the announcement, when the analyst asked why he did not continue to extend the offer to the regulator for more time, Morenkov said: "Qualcomm needs to provide certainty in addition to seeking new opportunities through mergers and acquisitions. Not only is it a certainty for investors and partners, but it also needs to be identifiable to employees."
Qualcomm's share price surged as its earnings exceeded expectations and Qualcomm announced that it would launch a 30 billion dollar share repurchase program if NXP was terminated.