Close

Qualcomm Opts For $10B Stock Repurchase Amid NXP Uncertainty

Qualcomm Inc. is on a mission to appease investors worried that its potentially game-changing acquisition of NXP Semiconductors N.V. will fail to get clearance from regulators. The company said Wednesday that it will buy its own shares in the open market from time to time until the $10 billion target has been reached. There is no expiration date on the re-purchase program, which begins immediately.

View watchlist
View watchlist

 

On Wednesday, the San Diego-based company announced that its board of directors has agreed to extend its earnings-enhancing stock buyback program. In a statement, the world’s largest maker of mobile-phone chips said it will gradually repurchase an extra $10 billion of its own shares back from the open market, effective immediately. No expiration date for the repurchasing program was provided. (See also: Why Did Trump Block Broadcom’s Bid for Qualcomm?)

The new plan replaces a $15 billion buyback program that Qualcomm first announced in March 2015. According to the San Diego-based company, there is still about $1.2 billion remaining from its existing program.

Qualcomm’s shares were up 1.56% in pre-market trading on Thursday morning.

“Consistent with our commitment to return capital to our stockholders, we are pleased that our board has approved a new stock repurchase authorization, which enables our continued anti-dilutive share repurchases and provides flexibility for potential additional repurchases, as we execute on our proposed acquisition of NXP,” said Steve Mollenkopf, CEO of Qualcomm.

Qualcomm has been working on completing its $43 billion acquisition of Dutch automotive chipmaker NXP Semiconductors for over 18 months. Qualcomm wants to buy NXP to reduce its reliance on smartphones, but is still awaiting regulatory clearance from China’s Ministry of Commerce to complete the deal.

Fears that the acquisition won’t go through have weighed on Qualcomm’s share price lately. The stock has fallen about 16% so far this year. (See also: How Chip Stocks May Get Killed By a Trade War)

Qualcomm hopes to get clearance for its acquisition of NXP by June 25. If Chinese regulators don’t sign off on the transaction by then, the San Diego-based company plans to use the cash it has set aside for the deal to buy back additional shares.

Qualcomm has returned more than $60 billion to shareholders since 2003 through a combination of dividends and stock repurchases.

Qualcomm and NXP have set July 25 as the deadline to complete the transaction. If Chinese regulators don’t approve it by then, Qualcomm has pledged to use freed up cash to buy back additional shares — possibly has much as $30 billion.

The goal would be to achieve $1.50 per share in adjusted earnings gains by fiscal 2019 — which is what the NXP acquisition is expected to deliver.

Investors aren’t optimistic that China will give its blessing. NXP’s shares have plunged 16 percent so far this year. They closed Wednesday at $98.64.

Leave a Reply

Your email address will not be published. Required fields are marked *