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July 21, 2015

Qualcomm next in line to split business?

The company is being pressurised by major shareholder.

By CBR Staff Writer

After eBay and HP, Qualcomm is expected to be the next tech giant to split into two with one unit focusing on the company’s chip-production business with the other concentrating on the patent-licensing operation.

The company is the world’s largest maker of chips that are used in mobile phones and it is set to announce its third-quarter results on Wednesday.

Apart from the split the company is reportedly looking for other options which include returning more cash to shareholders.

New York hedge fund Jana, which holds $2bn stake in the company, has been pressurising the company to spin off its chip business to cut costs, repurchase shares faster and bring new members to its board.

The Wall Street Journal cited sources familiar with the matter as saying that as part of the review the company may reshuffle its board and is likely to give Jana the opportunity to add independent directors to the board.

Qualcomm presently has market capitalisation of $104bn and it generates two-thirds of its $26bn in annual revenue from the chip business, while the royalties from the sale of smartphones only fetches the company $8bn in yearly profit.

The split should not come as a surprise, as 15 years ago the company made a similar decision and even went on to process the paperwork but scrapped the idea after signing several large licensing deals.

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