SAN DIEGO, Feb. 22, 2018 /PRNewswire/ -- The Board of
Directors of Qualcomm Incorporated (NASDAQ: QCOM) today sent a
letter to Qualcomm stockholders in connection with Qualcomm's 2018
Annual Meeting of Stockholders on March 6,
2018.
In the letter, the Board provides its perspective on the reduced
Broadcom acquisition proposal for Qualcomm and Qualcomm's amended
agreement to acquire NXP Semiconductors N.V. (NASDAQ: NXPI).
Qualcomm also posted a video with Qualcomm directors discussing
the Board and its view on value creation on
www.qcomvalue.com/videos/.
The letter follows:
February 22, 2018
Dear Fellow Qualcomm Stockholders:
The members of the Qualcomm Board of Directors are firmly
committed to maximizing value for Qualcomm stockholders. We are
highly confident in Qualcomm's strategic plan and its multiple
value drivers. At the same time, we have seriously evaluated
Broadcom's proposals and explained to Broadcom – including during
our meeting with them on February 14
– why their proposals are inadequate. We remain open to continued
discussions if a suitable proposal is presented. To date, no such
proposal has been made.
We believe Qualcomm's experienced Board is best qualified to
evaluate all opportunities to maximize value for stockholders --
whether through continued execution of our growth strategy or by
selling the Company. New directors would not change our
openness to a transaction that makes sense for our stockholders,
but would lower the overall quality of the Board at a critical time
for Qualcomm.
Use the WHITE CARD to re-elect all 11 Qualcomm directors
– they are working in your best interests.
THE REDUCED BROADCOM PROPOSAL REFLECTS ITS REFUSAL TO PAY A
FAIR PRICE FOR QUALCOMM
By lowering its proposal to $79.00
per share, Broadcom has made an inadequate proposal even worse
despite the indisputable increase in value and certainty that
Qualcomm stockholders will receive from the compelling and highly
accretive acquisition of NXP. Importantly, Broadcom has refused and
continues to refuse to engage with Qualcomm on price.
The Board unanimously believes that Broadcom's current
$79.00 per share proposal undervalues
Qualcomm, fails to take into account the strategic and financial
benefits of acquiring NXP, and continues to face a long and highly
uncertain path to regulatory approvals.
Members of this Board and management met with Broadcom earlier
this month to discuss a path to a transaction that both
appropriately valued Qualcomm and provided a sufficient level of
certainty around the regulatory issues. We entered the meeting with
Broadcom in a constructive manner, seeking a price increase and
engagement on issues related to transaction certainty. However,
Broadcom did not engage on the topic of price – repeatedly stating
that $82 per share was
"best-and-final."
Broadcom also insisted it had to control all material decisions
regarding our licensing business, one that has realized annual
revenues exceeding $7 billion, during
a lengthy regulatory process, despite the fact that this is not
permitted under antitrust laws. Additionally, Broadcom was
unwilling to agree to commitments that could be expected to be
required by the FTC, European Commission, MOFCOM and other
government regulatory bodies. Their proposed $8 billion reverse termination fee – which
equates to only $5.40 per share –
does not come close to compensating our stockholders for the
substantial value destruction likely to result if the transaction
were to fail to close due to regulatory issues.
The Qualcomm Board is highly confident in our ability to deliver
$6.75-7.50 in FY19 Non-GAAP EPS. At
any realistic multiple, that would result in a value for Qualcomm
well in excess of even an $82.00
proposal. Moreover, the value to Qualcomm stockholders of executing
our growth plan is not only higher but carries far less risk than
Broadcom's proposal. We are unwilling to give Broadcom an option at
$79.00 per share for 18 months while
we deliver on our strategy, as 5G gains momentum and NXP is
integrated.
CLEAR PATH TO COMPLETE STRATEGICALLY AND FINANCIALLY
COMPELLING NXP TRANSACTION
In deciding unanimously to increase its original offer, made in
October 2016, the Board concluded
that Qualcomm is far more valuable with NXP than without, and took
into account the following:
- NXP will provide significant strategic benefits to Qualcomm
including increased revenue diversification, substantial expansion
of serviceable addressable markets (SAM) and greater scale in
higher growth industry segments of Auto and IoT
- The strong market dynamics and positive outlook for key
industry segments
- High confidence in annualized cost synergies of at least
$500 million based on integration
planning
- NXP's non-GAAP operating income has increased by 20% – which
means the $127.50 per share price is
actually at a lower multiple than the original deal price
We are optimistic that in the near term the transaction will
receive the necessary additional tenders as well as the last
required regulatory clearance, and that the acquisition will close
shortly.
THE QUALCOMM BOARD IS SQUARELY FOCUSED ON MAXIMIZING THE
VALUE OF YOUR INVESTMENT
Qualcomm is well positioned to create value for stockholders
over the near- and long-term, particularly with a clear path to
completing the NXP transaction. At the same time, should Broadcom
present a proposal that delivers superior value and sufficiently
protects downside risk to you, we will pursue a sale. Thus far,
Broadcom has done neither.
We urge you to vote FOR the re-election of Qualcomm's
highly qualified Board on the WHITE proxy card TODAY to
protect the near- and long-term value of your investment. Remember,
vote only the WHITE proxy card and discard any Blue proxy
cards you receive from Broadcom.
Sincerely,
The Qualcomm Board of Directors
Barbara T.
Alexander
|
Ann M.
Livermore
|
Clark T. Randt,
Jr.
|
Jeffrey W.
Henderson
|
Harish
Manwani
|
Francisco
Ros
|
Thomas W.
Horton
|
Mark D.
McLaughlin
|
Anthony J.
Vinciquerra
|
Dr. Paul E.
Jacobs
|
Steve
Mollenkopf
|
|
VOTE the WHITE proxy card today.
Re-elect the Qualcomm Board online, by telephone,
or by signing, dating and returning the WHITE proxy card in
the postage-paid envelope provided.
DISCARD any BLUE proxy cards you receive from
Broadcom.
Voting the BLUE proxy card, even if you
"withhold" on all nominees, will revoke any vote you had previously
submitted on Qualcomm's WHITE proxy card. You have every
right to change your vote - only your latest-dated proxy will be
counted at the 2018 Annual Meeting.
If you have questions, or need assistance
in voting your shares, please contact:
INNISFREE M&A
INCORPORATED
Stockholders May
Call:
Toll-Free (877) 456-3442 (from the U.S. and
Canada)
(412) 232-3651
(from other locations)
Banks and Brokers May Call Collect:
(212) 750-5833
About Qualcomm
Qualcomm invents breakthrough technologies that transform how
the world connects and communicates. When we connected the phone to
the Internet, the mobile revolution was born. Today, our inventions
are the foundation for life-changing products, experiences, and
industries. As we lead the world to 5G, we envision this next big
change in cellular technology spurring a new era of intelligent,
connected devices and enabling new opportunities in connected cars,
remote delivery of health care services, and the IoT — including
smart cities, smart homes, and wearables. Qualcomm Incorporated
includes our licensing business, QTL, and the vast majority of our
patent portfolio. Qualcomm Technologies, Inc., a subsidiary of
Qualcomm Incorporated, operates, along with its subsidiaries, all
of our engineering, research and development functions, and all of
our products and services businesses, including, the QCT
semiconductor business. For more information, visit Qualcomm's
website, OnQ
blog, Twitter and Facebook pages.
ADDITIONAL INFORMATION
Qualcomm has filed a definitive proxy statement and WHITE proxy
card with the U.S. Securities and Exchange Commission (the "SEC")
in connection with its solicitation of proxies for its 2018 Annual
Meeting of Stockholders (the "2018 Annual Meeting"). QUALCOMM
STOCKHOLDERS ARE STRONGLY ENCOURAGED TO READ THE DEFINITIVE PROXY
STATEMENT (AND ANY AMENDMENTS AND SUPPLEMENTS THERETO) AND
ACCOMPANYING WHITE PROXY CARD AS THEY CONTAIN IMPORTANT
INFORMATION. Stockholders may obtain the proxy statement, any
amendments or supplements to the proxy statement and other
documents as and when filed by Qualcomm with the SEC without charge
from the SEC's website at www.sec.gov.
CERTAIN INFORMATION REGARDING PARTICIPANTS
Qualcomm, its directors and certain of its executive officers
may be deemed to be participants in connection with the
solicitation of proxies from Qualcomm's stockholders in connection
with the matters to be considered at the 2018 Annual Meeting.
Information regarding the identity of potential participants, and
their direct or indirect interests, by security holdings or
otherwise, is set forth in the proxy statement and other materials
to be filed with the SEC. These documents can be obtained
free of charge from the sources indicated above.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Any statements contained in this document that are not
historical facts are forward-looking statements as defined in the
U.S. Private Securities Litigation Reform Act of 1995.
Additionally, statements regarding operating results for future
years, growth in operating results and the factors contributing to
future operating results; the resolution of licensing disputes and
the impact and timing thereof; expected market, industry,
geographic and organic growth and trends; future serviceable
addressable market size and growth; anticipated contributions from
and growth in new opportunities; benefits from planned cost
reductions; technology and product leadership and trends;
Qualcomm's positioning to benefit from any of the above; potential
benefits and upside to Qualcomm's stockholders related to any of
the above; and the regulatory process and regulatory uncertainty
are forward-looking statements. Words such as "anticipate,"
"believe," "estimate," "expect," "forecast," "intend," "may,"
"plan," "project," "predict," "should," "will" and similar
expressions are intended to identify such forward-looking
statements. These statements are based on Qualcomm's current
expectations or beliefs, and are subject to uncertainty and changes
in circumstances. Actual results may differ materially from those
expressed or implied by the statements herein due to changes in
economic, business, competitive, technological, strategic and/or
regulatory factors, and other factors affecting the operations of
Qualcomm. More detailed information about these factors may be
found in Qualcomm's filings with the SEC, including those discussed
in Qualcomm's most recent Annual Report on Form 10-K and in any
subsequent periodic reports on Form 10-Q and Form 8-K, each of
which is on file with the SEC and available at the SEC's website at
www.sec.gov. SEC filings for Qualcomm are also available in the
Investor Relations section of Qualcomm's website at
www.qualcomm.com. Qualcomm is not obligated to update these
forward-looking statements to reflect events or circumstances after
the date of this document. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as
of their dates.
NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES
The Non-GAAP financial information presented herein should be
considered in addition to, not as a substitute for or superior to,
financial measures calculated in accordance with GAAP. In addition,
"Non- GAAP" is not a term defined by GAAP, and as a result, the
Company's measure of Non-GAAP results might be different than
similarly titled measures used by other companies. Reconciliations
between GAAP and Non-GAAP results are presented herein.
The Company uses Non-GAAP financial information: (i) to
evaluate, assess and benchmark the Company's operating results on a
consistent and comparable basis; (ii) to measure the performance
and efficiency of the Company's ongoing core operating businesses,
including the QCT (Qualcomm CDMA Technologies) and QTL (Qualcomm
Technology Licensing) segments; and (iii) to compare the
performance and efficiency of these segments against competitors.
Non-GAAP measurements used by the Company include revenues, cost of
revenues, R&D expenses, SG&A expenses, other income or
expenses, operating income, interest expense, net investment and
other income, income or earnings before income taxes, effective tax
rate, net income and diluted earnings per share. The Company is
able to assess what it believes is a more meaningful and comparable
set of financial performance measures for the Company and its
business segments by using Non-GAAP information. In addition, the
Compensation Committee of the Board of Directors uses certain
Non-GAAP financial measures in establishing portions of the
performance-based incentive compensation programs for our executive
officers. The Company presents Non-GAAP financial information to
provide greater transparency to investors with respect to its use
of such information in financial and operational decision-making.
This Non-GAAP financial information is also used by institutional
investors and analysts in evaluating the Company's business and
assessing trends and future expectations.
Non-GAAP information used by management excludes its QSI segment
and certain share-based compensation, acquisition-related items,
tax items and other items.
- QSI is excluded because the Company expects to exit its
strategic investments in the foreseeable future, and the effects of
fluctuations in the value of such investments and realized gains or
losses are viewed by management as unrelated to the Company's
operational performance.
- Share-based compensation expense primarily relates to
restricted stock units. Management believes that excluding non-cash
share-based compensation from the Non-GAAP financial information
allows management and investors to make additional comparisons of
the operating activities of the Company's ongoing core businesses
over time and with respect to other companies.
- Certain other items are excluded because management views such
items as unrelated to the operating activities of the Company's
ongoing core businesses, as follows:
-
- Acquisition-related items include amortization of certain
intangible assets, recognition of the step-up of inventories to
fair value and the related tax effects of these items, as well as
any effects from restructuring the ownership of such acquired
assets. Additionally, the Company excludes expenses related to the
termination of contracts that limit the use of the acquired
intellectual property, third-party acquisition and integration
services costs and costs related to temporary debt facilities and
letters of credit executed prior to the close of an acquisition.
Starting with acquisitions in the second quarter of fiscal 2017,
the Company excludes recognition of the step-up of property, plant
and equipment from the net book value based on the original cost
basis to fair value. Such charges related to acquisitions that were
completed prior to the second quarter of fiscal 2017 continue to be
allocated to the segments, and such amounts are not material.
- The Company excludes certain other items that management views
as unrelated to the Company's ongoing business, such as major
restructuring and restructuring-related costs, goodwill and
indefinite- and long-lived asset impairments and awards,
settlements and/or damages arising from legal or regulatory
matters.
- Certain tax items that are unrelated to the fiscal year in
which they are recorded are excluded in order to provide a clearer
understanding of the Company's ongoing Non-GAAP tax rate and after
tax earnings.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Qualcomm Fiscal
2019 Estimated Earnings Per Share (EPS)
|
Fiscal
2019
|
GAAP diluted
EPS
|
$4.47 -
$5.22
|
Less: Diluted EPS
attributable to QSI
|
$0.02
|
Less: Diluted EPS
attributable to share-based compensation
|
($0.73)
|
Less: Diluted EPS
attributable to other items (1)
|
($1.57)
|
Non-GAAP diluted
EPS
|
$6.75 -
$7.50
|
Less: Diluted EPS
attributable to income from customers involved in licensing
disputes
|
$1.50 -
$2.25
|
Non-GAAP EPS,
before impact of expected licensing resolution
|
$5.25
|
Fiscal 2019
Accretion from NXP
|
Fiscal
2019
|
GAAP diluted
EPS
|
$0.08
|
Less: Diluted EPS
attributable to QSI
|
N/A
|
Less: Diluted EPS
attributable to share-based compensation
|
($0.16)
|
Less: Diluted EPS
attributable to other items(1)
|
($1.26)
|
Non-GAAP diluted
EPS
|
$1.50
|
Fiscal 2019 estimated EPS and EPS accretion assume close of the
pending NXP acquisition. Estimated amortization of intangible
assets included in other items was based on a preliminary purchase
price and are subject to change when the formal valuation and other
studies are finalized. The differences that will occur between the
preliminary estimates and the final purchase accounting could be
material.
(1) Other items excluded from Non-GAAP consist primarily of
acquisition-related items.
Sums may not equal totals due to rounding.
Qualcomm Contacts:
Pete Lancia, Corporate
Communications
Phone: 1-858-845-5959
Email: corpcomm@qualcomm.com
John Sinnott, Investor
Relations
Phone: 1-858-658-5431
Email: ir@qualcomm.com
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SOURCE Qualcomm Incorporated