Cowen Sees the Qualcomm/NXP Semi Deal as 'Transformational' (QCOM) (NXPI)
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The firm commented on Thursday:
While not without integration challenges (QCOM is fabless) is partially integrated with significant mfg operations), the bottom line is that we love this deal for QCOM and we have been suggesting for almost a year, since last November (QCT Better, QTL Worse), and five additional times in the intervening period. Given the significant accretion to this deal (see below) and how much we think QCOM needs NXPI, we are frankly a bit surprised NXPI would not push for a higher price.
IoT/connected everything is the most fertile new ground for QCOM and this deal is highly synergistic with QCOM's current efforts as the 5G standard takes shape. While many IoT devices will be low ASP commodities, Automotive and Industrial are IoT verticals that we see as more profitable for semiconductors, and this is precisely the exposure that QCOM gains with NXPI. With NXPI’s sensor, analog, and in-car/industrial networking capability combined with QCOM’s processing and connectivity solutions, QCOM could become the dominant player in connected industrial/automotive applications and gains even further leverage in defining the 5G ecosystem.
Additionally, the impact on QCOM's stock should be positive as the incessant focus on smartphone units - most specifically iPhone - will now be significantly mitigated and QCT should also get a much better multiple in a SOTP as a result (we recently raised our target to $74 to reflect a 15x multiple for QCT - more in-line w/the sector - rather than a 10x prior assumption).
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