US chipmaker Qualcomm is reported to have come under pressure from an activist shareholder called Jana Partners to separate its manufacturing unit from its patents business.
According to a report from the Wall Street Journal (subscription required), Jana Partners believes the move would boost the share price of the company, essentially viewing the manufacturing business as a drag on the more valuable patents arm.
At the end of last week, Qualcomm Inc. (Nasdaq: QCOM)'s share price had lost nearly 13% of its value on the Nasdaq over the preceding year amid concern about the company's prospects, but shares were trading up around 3.5% this morning following the report.
In February, the chipmaker agreed to pay a $975 million fine to settle an antitrust spat with Chinese authorities. It also said it would reduce licensing fees for 3G and 4G devices. (See Qualcomm to Pay $975M in China Antitrust Spat.)
Qualcomm also suffered a setback early this year when Samsung Electronics Co. Ltd. (Korea: SEC) opted to use one of its own processors for the Galaxy S6 device in preference to Qualcomm's new Snapdragon chip.
Reporting results for its first (October-to-December) quarter, Qualcomm flagged a 7% increase in revenues, to $7.1 billion, and a 5% rise in net income, to $2 billion, but lowered its earnings expectations for the second half of the fiscal year because of heightened competition in China, among other factors.
Seeking to pacify investors, the company last month unveiled plans for a $15 billion share buyback and said it would raise quarterly dividends, but Jana Partners is said to have urged Qualcomm to go further.
Besides asking Qualcomm to hive off its patents business, it is allegedly pushing for additional cost cutting, changes to the board of directors and further stock buybacks.
Most of Qualcomm's revenues come from the sale of communications chips, but its intellectual property business -- based around the licensing of CDMA technology -- is thought to generate the bulk of its profits.
According to a report from Reuters, Jana has invested about $2 billion in Qualcomm and is therefore one of the chipmaker's biggest shareholders.
— Iain Morris, , News Editor, Light Reading