Update: 3:40 p.m This story has been updated to include a statement released this afternoon from Qualcomm.
NEW YORK (TheStreet) -- Shares of Qualcomm Inc. (QCOM) - Get Report are down 0.58% to $68.76 on very heavy volume in late afternoon trading on Monday. Earlier in the day the stock was up over 4% following a Wall Street Journal report saying activist investor Jana Partners LLC is pressuring the chip maker to consider a breakup in order to give its lagging stock price a boost.
Qualcomm has since responded to the statements made by Jana, stating: "Qualcomm welcomes input from our stockholders, including JANA Partners, and we are firmly committed to maintaining an active dialogue with all stockholders and to acting in their best interests."
"Our opportunities remain strong. Our innovations have made smartphones the most pervasive technology of our time. They come to market through our inclusive licensing program and our cutting-edge chipsets and continue to play an integral role in the expansion of the mobile industry. We are now bringing the benefits of mobile technologies to new areas such as automotive, healthcare, networking, smart homes, smart cities, and wearables among others," the company went on to say.
Qualcomm indicated that it is not likely to consider a major corporate restructuring when it noted "Prior reviews have concluded that the synergies provided by our business model create more value for stockholders than could be created through alternative corporate structures. We will continue to evaluate opportunities to enhance stockholder value and are committed to pursuing the right course of action for all of our stockholders."
Jana, one of Qualcomm's largest shareholders with a stake of over $2 billion, wants Qualcomm to look into spinning off its chip business from its patent licensing business, which is what accounts for most of the company's profit, Jana said in a quarterly letter to investors viewed by the Journal.
TheStreet's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio says, "Been a suckers game to disagree with Jana but as I said in RealMoney this morning, if Qualcomm wins back Apple(AAPL) - Get Report all is forgiven!"
Fifteen years ago Qualcomm proposed the same merger but called it off.
Jana is also looking for Qualcomm to cut costs, increase stock buybacks, and make changes to its executive pay structure, financial reporting and board of directors.
Separately, TheStreet Ratings team rates QUALCOMM INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate QUALCOMM INC (QCOM) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, impressive record of earnings per share growth and increase in net income. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- QCOM's revenue growth has slightly outpaced the industry average of 0.1%. Since the same quarter one year prior, revenues slightly increased by 7.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- QCOM has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.13, which clearly demonstrates the ability to cover short-term cash needs.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Communications Equipment industry and the overall market, QUALCOMM INC's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
- QUALCOMM INC has improved earnings per share by 39.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, QUALCOMM INC increased its bottom line by earning $4.40 versus $3.91 in the prior year. This year, the market expects an improvement in earnings ($5.01 versus $4.40).
- The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Communications Equipment industry average. The net income increased by 5.2% when compared to the same quarter one year prior, going from $1,875.00 million to $1,972.00 million.
- You can view the full analysis from the report here: QCOM Ratings Report