Mobile communications chipmaker Qualcomm has ruled out dividing itself into separate manufacturing and patents businesses following what it calls a "comprehensive review" of its existing structure and alternative options.
Citing better 3G and 4G device prices and shipments than it had expected to see in the October-to-December quarter, and good progress on realizing cost savings, the company also indicated that earnings per share would be at "the high end" of the $0.80-0.90 range it previously forecast.
That would still mark a substantial decline since the corresponding quarter last year, when Qualcomm made $1.34 in earnings per share on a non-GAAP and $1.17 on a GAAP basis.
In a statement justifying the no-split decision, Qualcomm executives argued the current structure would deliver greater value to shareholders and allow the company to maintain its "technology leadership."
"The strategic benefits of the current structure will best fuel Qualcomm's growth as we move through the upcoming technology transitions and extend our technologies into new user experiences, services and industries," said Steve Mollenkopf, Qualcomm's CEO. "The strategic benefits and synergies of our model are not replicable through alternative structures."
Qualcomm has been under pressure from an activist shareholder called Jana Partners to spin off its chips unit so that it can focus on the more valuable patents arm. (See Qualcomm Urged to Spin Off Chips Unit.)
Jana reckons the split could deliver a boost to Qualcomm's share price, which has fallen by 32% over the last year but was trading up 2.3% on the Nasdaq on Tuesday morning following news of the strategic decision.
While most of Qualcomm's revenues come from the sale of communications chips, its intellectual property business -- based around the licensing of CDMA -- is thought to generate most of the profits.
Qualcomm developed a number of the technologies that underpin 3G and 4G communications but has been accused of abusing its power by charging exorbitant royalties for the use of its patents.
In February, it agreed to pay a $975 million fine to settle an antitrust spat in China and to reduce the licensing fees it charges in the country for some technologies. (See Qualcomm to Pay $975M in China Antitrust Spat.)
However, its licensing practices are also under scrutiny in other jurisdictions, including the Japan, South Korea and the US, while the European Union earlier this month accused Qualcomm of using its dominant position to block rivals.
In July, hoping to placate Jana, Qualcomm unveiled plans to cut $1.4 billion in costs, indicating that it would find savings by reducing headcount, streamlining its engineering business and shifting resources to lower-cost regions. (See Qualcomm Restructures to Cut $1.4B in Costs .)
Sales expectations took a knock earlier this year after South Korea's Samsung, a flagship customer, decided to use one of its own processors for the Galaxy S6 device rather than a Snapdragon chip from Qualcomm. (See Qualcomm Slashes Revenue Forecast by $1B.)
The growing popularity of Apple's iPhone, which does not use Qualcomm chips, is another headache for Qualcomm executives.
For the fiscal year ending September 2015, Qualcomm reported revenues of about $25.3 billion, 5% less than in 2014, and saw net income fall by 34%, to $5.3 billion.
— Iain Morris, , News Editor, Light Reading