Consolidation of the Chip Sector Continues: Qualcomm buys NXP

28Oct - by The AntiGlobalist - 0 - In News


(Investor’s Business Daily/Seitz) After a weekslong courtship, Qualcomm (QCOM) reportedly is set to marry NXP Semiconductors (NXPI).

San Diego-based Qualcomm has reached an agreement to acquire Dutch chipmaker NXP for about $110 a share in cash, CNBC reporter David Faber said Friday. Other details are still being negotiated, he said. The deal would value NXP at roughly $37 billion. Reuters also reported that a deal has been reached.

By the closing bell Friday, Qualcomm shares added 0.9% to 67.93 on the stock market today. NXP stock, however, dropped 2.7% to 101.71.

IBD’S TAKE: The semiconductor sector is one of the hottest areas of the stock market now. TheIBD 50 list of superior stocks includes eight chip industry stocks, but Qualcomm and NXP are not among them. Check out the article titled “Semiconductor Sector Still Offers Plenty Of Leadership.”

An acquisition of NXP would help Qualcomm diversify beyond mobile-phone chips. The deal would give Qualcomm exposure to the automotive, industrial and Internet of Things markets.

Qualcomm was among the chipmakers hurt by Samsung’s recent decision to cancel its fire-prone Galaxy Note 7 smartphone. Qualcomm gets nearly 3% of its revenue from Samsung, Pacific Crest Securities estimates.

Purchasing NXP would allow Qualcomm to become an end-to-end chip supplier to the automotive market.

The deal would create the second-largest chip company by revenue, after Intel (INTC).

News of the possible Qualcomm-NXP tie-up was first reported on Sept. 29, sending NXP shares up 17% on the day.

Spokespeople for NXP and Qualcomm on Friday said it is company policy to not comment on rumors or speculation.

Qualcomm’s two largest acquisitions to date were its $2.4 billion purchase of CSR in 2015 and $3.1 billion purchase of Atheros Communications in 2011.

Headquartered in the Netherlands, NXP makes high-performance mixed-signal processors for communications, security, automotive and industrial applications. Among its biggest customers are Apple (AAPL), Bosch, Ericsson (ERIC), Huawei, Hyundai, Nokia (NOK) and Samsung.

If the Qualcomm-NXP merger occurs, it would be part of a wave of consolidation occurring in the chip sector.

In May, disk drive maker Western Digital (WDC) completed its $19 billion acquisition of flash chip company SanDisk. On Feb. 1, the biggest chip merger ever — biggest merger of two tech companies ever — was completed between Avago and Broadcom (AVGO), with the $37 billion combination taking the Broadcom name but keeping Avago’s AVGO stock ticker. And in December, NXP completed its own huge deal, acquiring Freescale Semiconductor in a transaction valued near $12 billion.

Qualcomm and NXP are members of IBD’s Electronics-Semiconductor Fabless industry group, which currently ranks No. 10 out of 197 groups.

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