Qualcomm (QCOM) May Have Better Options Than to Buy NXP (NXPI) - Detwiler Fenton

October 12, 2016 3:56 PM EDT
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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.

If Qualcomm chooses not to go the NXP route, two companies that could deliver long-term synergy and potential to the company are: Xilinx (NASDAQ: XLNX) and Mellanox (NASDAQ: MLNX).

NVIDIA (NASDAQ: NVDA) would be another potential target worth considering, they said.



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Comments

A typical blank bullet analysis without knowledge of technology
Patrick on 2016-10-12 17:23:05
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Intel is old school, so do many other tech companies and that means nothing about a technology marriage.
A technology merge make sense or not it's not just the number, you need to have vision of future market. Qualcomm/NXP is a integration that will enable consumer, the future world a mini device (can be implanted in body) replace physical existence of ID card /currency/credit card. It also will enable consumer to use cryptocurrency such as bitcoin. The future economic will be enabled by highly encrypted technology, which I don't think other potential merge targets mentioned in this article can achieve.


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