Jana: Qualcomm Should 'Consider Its Strategic M&A Potential'

QUALCOMM, Inc. (NASDAQ: QCOM) should attempt to boost its share price with a half-dozen steps including cost cutting and the separation of its patent business from its chipset unit, according to an activist shareholder.

In a letter to its investors Monday, Jana Partners LLC said it's been in talks with Qualcomm recently urging the measures, which also include reducing the size of its 15-member board and accelerating share repurchases.

Qualcomm opened higher Monday on the news, but changed hands recently at $69.09, down $0.07 cents.

Jana also urged Qualcomm to "consider its strategic M&A potential," and cited an analyst who suggested Intel Corporation (NASDAQ: INTC) might buy Qualcomm's chipset business if it were separate from its licensing unit.

Jana said Qualcomm's chipset business, which provides about 70 percent of company revenue last year, is "essentially worthless" at the company's current stock price.

Related Link: The Activist Letter Moving Qualcomm Today

Finally, Jana said Qualcomm should shift its executive compensation targets to focus on earnings and return on capital, and away from revenue and operating earnings growth.

The change would eliminate "grow at any cost" incentives, while encouraging buybacks and providing "an important check on stock-based compensation," Jana said.

Jana, with about $11 billion under management, said its $2 billion investment in Qualcomm makes it one of the company's largest investors.

Jana holds 4.4 million Qualcomm shares as well as 6.16 million call options, as of an amended quarterly filing made April 13.

BlackRock Inc. and Vanguard Group each hold a bit more than a 6 percent stake in Qualcomm, which has 1.65 billion shares outstanding.

No other shareholders held more than a 1 percent stake as of December, according to the company's 2015 proxy statement.