Qualcomm Needs NXP Semiconductor

Qualcomm (NASDAQ: QCOM) could use some good news. The semiconductor giant, which supplies integrated CPU and modem chips for the smartphone market, is getting sued by governments. Apple (NASDAQ: AAPL) is disputing the royalty payment rates. Though Apple cannot really afford to have Qualcomm stop supplying chips to it, the company believes the amount it owes to Qualcomm is too high.

To diversify its business away from the smartphone market, Qualcomm needs the NXP Semiconductor (NASDAQ: NXPI) deal closing. But not all shareholders have tendered their shares. European regulators have yet to approve the deal, either. Big shareholders may not have tendered their shares yet as they away final approval. The longer the deal takes, the higher the costs for Qualcomm.

NXPI stock has the potential for fetching more than $110 a share but the opposite is true. If the market corrects, NXPI shareholders could see the stock price fall below the buyout price. If NXPI shareholders rally for more but stock markets do not correct, then QCOM may have to offer more than $110 per share to buy the company.

Bottom line
NXPI is strategically important for Qualcomm. It needs to broaden its business away from smartphone markets. The combined company will have a broader IP portfolio and have higher worth for QCOM shareholders.