Qualcomm re-elects board of directors with tepid support

[SAN DIEGO] Qualcomm re-elected its board of directors on Friday with weak support from shareholders, who grilled the US chipmaker over its strategy following its successful defense against a US$117-billion hostile bid from Broadcom.

Qualcomm has been under pressure to defend its decision to take Broadcom's bid to a US national security panel for review. This resulted in US President Donald Trump blocking the deal earlier this month over concerns the acquisition would set the United States back in its race against China to develop 5G wireless technology.

The re-election of Qualcomm's directors was not in doubt on Friday given that Mr Trump had ordered Broadcom to drop its challenge to Qualcomm's board and withdraw its nominees. However, the investor support the Qualcomm directors received was lower than in most cases where directors run for election unopposed.

Some of the directors were elected with more than 50 per cent of the vote. The rest, including Qualcomm chief executive Steve Mollenkopf, received support in the range of 40 per cent to 50 per cent, according to sources familiar with preliminary results of the shareholder vote.

"Anything below 80 per cent to 90 per cent of votes cast is kind of questionable, 40 per cent is very questionable. (Trump)has created some breathing room for Qualcomm. Hopefully, they will use it wisely and improve both their Board and company," said Kevin McManus, vice president and director of proxy services for Egan-Jones Proxy Services.

Ahead of Friday's meeting, Institutional Shareholder Services Inc, a shareholder advisory firm, had urged investors to lodge protest votes for Broadcom's withdrawn board nominees, even though they would not be counted under the company's rules.

Mr Mollenkopf told investors following the company's rejection of Broadcom's bid that he could achieve earnings per share of US$6.75 to US$7.5 in fiscal 2019, through a number of measures, including a US$1-billion cost reduction program and the resolution of licensing disputes, including with Apple.

One shareholder at the meeting asked whether Qualcomm planned to return some or all of its offshore cash to shareholders "who have seen the shares go up to US$80 and now is at US$55" but "have been faithful. How about a little of that (cash)?"

Qualcomm CFO George Davis said the company's offshore cash was already earmarked for use in the company's US$44-billion acquisition of chip maker NXP Semiconductors, which is pending clearance from Chinese regulator MOFCOM.

"That doesn't sound close to US$80," the shareholder responded. Mr Davis pointed to the company's earnings goal for its fiscal 2019. "That probably sounds more like US$80," Mr Davis said.

Smaller Board

Qualcomm last week said its board would shrink to 10 directors from 11 because former chairman Paul Jacobs, the son of Qualcomm's co-founder, would not be renominated for the board after disclosing his intention to pursue a long-shot bid to take the company private.

Qualcomm shares closed down down 1.9 per cent on Friday at US$53.66. NXP shares ended down 0.7 per cent at US$120.19, their lowest level since Qualcomm revised its NXP bid last week, amid investor concerns that China will block the deal.

In response to a shareholder question about MOFCOM's delay in approving the NXP deal, Don Rosenberg, Qualcomm's legal chief, said that Qualcomm had been "actively engaged" with Chinese regulators "as recently as this week."

Mr Mollenkopf said he believed the company would close the NXP deal on schedule and noted he was headed to China for a conference immediately after the shareholder meeting. But in response to separate shareholder question about US-China relations, he said Qualcomm has little visibility into broader trends between the two nations.

"This is a little bit of uncharted territory for all of us," Mr Mollenkopf said. "We have developed a strong China-friendly, US-friendly business model."

On Friday, Broadcom said its shareholders had voted to redomicile the company from Singapore to the United States.

The company is hoping this will make its future acquisitions exempt from reviews from the US security panel, known as the Committee on Foreign Investment in the United States.

However, Mr Trump's order prohibiting a Broadcom bid for Qualcomm continues to apply even after the redomiciling to the United States.

REUTERS