With the prospect of a hostile takeover by Broadcom Ltd. (AVGO) now gone, Qualcomm Inc. (QCOM) will have to deal with its ongoing licensing issues with Apple Inc. (AAPL) if it is to revive its flagging stock price, analysts said.
"[Qualcomm] is on their own now," Bernstein analyst Stacy Rasgon said Tuesday. "Now they have to rebuild credibility with their shareholders."
Qualcomm shares dropped 4.6% to $59.95 Tuesday morning following President Trump's announcement late on Monday that he was denying Broadcom's takeover of Qualcomm because of national security concerns. Broadcom's most recent $79-per-share cash/stock offer for Qualcomm was 45% higher than where Qualcomm traded before the reports of Broadcom's bid surfaced last October.
Over the last three years, Qualcomm's stock is down 14%, compared to the Nasdaq's 50% rise over the same time period.
Rasgon said Qualcomm's challenges now include settling the company's disputes with Apple, which has been refusing to pay licensing fees for using Qualcomm's technology in its smartphones and tablets, arguing that Qualcomm is operating an "illegal business model." In January 2017, the Federal Trade Commission accused Qualcomm of imposing monopolistic licensing terms on cellphone makers such as Apple in a case that's ongoing.
"Broadcom's offer price was extremely opportunistic, as they came in right after Apple [began refusing] to pay licensing fees," Stifel analyst Kevin Cassidy said. "Shares have been depressed because of the legal battle [Qualcomm] is having with Apple."
In the wake of Trump's presidential order, Cassidy said that Trump's concerns about national security risk -- likely due to Qualcomm's work developing advanced 5G cellular technology -- could help Qualcomm settle its licensing dispute with Apple.
"I think it gives a lot of credence to Qualcomm's argument," Cassidy said. "My view is that if the U.S. government is saying their technology is important to national security ... Apple should support the patents."
Qualcomm is also waiting for the Chinese government to approve the company's acquisition of NXP Semiconductors NV (NXPI) , which would give Qualcomm exposure to the fast-growing automotive and autonomous driving markets, Cassidy said. He believes the deal will likely close soon.