Qualcomm (QCOM) May Have Better Options Than to Buy NXP (NXPI) - Detwiler Fenton
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It's widely believed that Qualcomm (NASDAQ: QCOM) will scoop up NXP Semiconductors (NASDAQ: NXPI) for a price around $120/share. However, today analysts at Detwiler Fenton said that while they are fans of a potential deal there are some possible negatives of a merger that are worth discussing.
First they highlighted that NXP is an "old school European analog semiconductor company that is still working on its mega-acquisition of another old school Semiconductor company - Freescale. QCOM, on the other hand, is the equivalent of a millennial semiconductor company." Meanwhile, Qualcomm "is the equivalent of a millennial semiconductor company," they said.
NXP has production facilities all over the world (Hamburg, GR, Manchester, UK, Chandler, AZ and Austin, TX (x2), Nijmegen, Netherlands, and Singapore). QCOM, on the other hand, is the epitome of a fabless semiconductor company.
The only thing the two have in common is debt. The firm said the combination of the two plus acquisition financing could be around $30 billion for a once fabless semiconductor innovator.
They say a much better cultural fit for an NXP acquisition is another old-school semiconductor company – perhaps Texas Instruments (NYSE: TXN). They highlighted that NXP CEO Rick Clemmer, is a TXN alum (former SVP and Semiconductor Group CFO). NXP's Chairman, Sir Peter Bonfield, is also ex-TXN.
Another better cultural fit for NXPI would be a merger with On Semiconductor (NYSE: ON) given the shared history of Freescale (acquired by NXP in 2015) and ON Semiconductor (bought six fabs). ON Semiconductor is a 1999 spin-off of Motorola Semiconductor, and Freescale is also a spin-off of Motorola (2004). Combined they would be a strong #2 challenger to TXN.
NVIDIA (NASDAQ: NVDA) would be another potential target worth considering, they said.
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