Dallas, Texas 07/22/2015 (Financialstrend) – QUALCOMM, Inc. (NASDAQ:QCOM) is considering spinning off its licensing business according to reports, as the company comes under pressure from investors pushing for changes. As part of a strategic review process, the company will carry out a buyback of its shares in a bid of boosting its stock price that has come under pressure.
Push For More Shareholder Value
A potential breakup could result in the separation of the company’s chip production business from the highly lucrative licensing business. QUALCOMM, Inc. (NASDAQ:QCOM) generates two-thirds of its revenue from the chips business. However, the licensing business accounts for nearly two-thirds of the company’s total profit of about $8 billion.
QUALCOMM, Inc. (NASDAQ:QCOM) has come under immense pressure from activist investor Jana Partners LLC over concerns it is not generating enough value. The hedge fund, which holds more than $2 billion in the company’s shares believes a probable break-up could lead to more value being generated going forward. The hedge fund has also been pushing for cost cuts, stock buybacks as well as a reshuffle of the company’s board.
Changes to the Board.
There are reports that QUALCOMM, Inc. (NASDAQ:QCOM) as part of the strategic review process may consider reshuffling its board in a process that could result in the inclusion of one independent director most likely from Jana. Mounting pressure from investors saw the company’s board approve a $15 billion repurchase program that is expected to boost the stock price that is already down by 14%.
QUALCOMM, Inc. (NASDAQ:QCOM) has already admitted that its earnings could come under pressure this year having failed to seal deals for its chips business. The chip giant expects earnings per share for the quarter to come in at 85 cents, down from $1.44 a share last year on revenues of between $5.4 billion and $6.2 billion
It will not be the first time that a company has split itself into two with a view of generating more value going forward. Hewlett-Packard Company (NYSE:HPQ) has already initiated plans to split itself into two. EBay Inc (NASDAQ:EBAY has already let go its payment unit PayPal Holdings Inc. (NASDAQ:PYPL); that is currently trading on its own.