In addition, Chief Executive Officer Steve Mollenkopf, Executive Chairman and Chairman of the Board Dr. Paul E. Jacobs, President Cristiano Amon, Chief Financial Officer George Davis and General Counsel Don Rosenberg will discuss Qualcomm's clear path to significant near-term value creation for stockholders in a video presentation starting at 9:00 am ET available at www.qcomvalue.com/investor-presentation. At that time, Qualcomm will file an investor presentation with the Securities and Exchange Commission ("SEC") and post it to www.qcomvalue.com/investor-presentation. The Company will also post a video featuring Mr. Mollenkopf discussing Qualcomm's leadership position in 5G and the significant value creation opportunities ahead for Qualcomm stemming from its investments in 5G.
The stockholder letter, presentation and videos (and/or video transcripts), along with other materials related to the Company's 2018 Annual Meeting, will be available at www.qcomvalue.com and at www.sec.gov. The website will be updated as additional information becomes available.
The full text of the letter follows:
January 16, 2018
Dear Qualcomm Stockholder,
For over 30 years, Qualcomm has pioneered the foundational technologies that have revolutionized how people connect and communicate with each other and the world around them. Our success in leading each new transition in mobile technology is the result of our intense focus on always looking forward – developing transformative technologies, establishing ecosystems where our products thrive, and driving sustainable value creation.
Today we are executing a strategy that we are confident will continue to generate significant value for our stockholders in the near term with additional upside. We are firmly committed to delivering $6.75 - $7.50 in fiscal 2019 Non-GAAP earnings per share ("EPS"). Our path to delivering substantial value to Qualcomm stockholders includes the continued strong performance of QCT, a cost reduction program that is specific and actionable, value creation from our NXP acquisition (or, alternatively, a large share repurchase) and the expected value upside from resolution of current licensing disputes. Moreover, our stockholders are also poised to realize the value of Qualcomm's leadership position in 5G, which is in the early stages of transforming multiple industries, including mobile, IoT, automotive and many others. This is why we have rejected Broadcom's attempt to acquire Qualcomm at an opportunistic and extremely low price, with a highly uncertain – perhaps impossible – regulatory path to completion.
Broadcom is asking Qualcomm stockholders to voluntarily transfer to a hostile acquirer the considerable near- and long-term value creation Qualcomm has in front of it. It is attempting to acquire Qualcomm at an opportunistic, inferior price by installing a slate of conflicted Broadcom/Silver Lake nominees with minimal relevant experience.
The Qualcomm Board strongly objects to Broadcom's aggressive tactics and urges you to reject its solicitation efforts by voting FOR the re-election of Qualcomm's highly qualified slate of directors on the enclosed WHITE proxy card today. Vote only the WHITE proxy card – please discard any Blue proxy cards you receive from Broadcom.
Your Board rejected Broadcom's proposal because:
- It dramatically undervalues Qualcomm and does not reflect our clear path to near term value. Based on our committed $6.75-$7.50 in fiscal 2019 Non-GAAP EPS, the Broadcom proposal implies a P/E multiple substantially below peer trading multiples and precedent transaction multiples.
- It carries significant regulatory uncertainty – as the largest potential transaction in the technology industry, regulatory approvals could take 18 months or more and may require complex divestitures or operating restrictions making clearance difficult, if not impossible, to obtain. Divestitures will likely be demanded that may not be feasible in the face of national security and other issues.
- It gives no value to the transformative opportunity in 5G and Qualcomm's ability, through its leadership position and targeted investments, to deliver significant stockholder value as we capture this opportunity.
- It asks stockholders to place a conflicted Board slate in place for a transaction that would likely not be completed for at least 18 months, if ever – exposing the Company to significant oversight risk relative to Qualcomm's experienced and capable Board, as well as business risk during pendency of regulatory review.
- It is designed to benefit only Broadcom stockholders – not Qualcomm stockholders.
We urge you to block Broadcom's attempt to capture, for itself, the value that rightly belongs to you as a Qualcomm stockholder, by voting FOR Qualcomm's director nominees on the WHITE proxy card TODAY. Vote only the WHITE proxy card – please discard any Blue proxy cards you receive from Broadcom.
QUALCOMM HAS SIGNIFICANT BUSINESS MOMENTUM AND THE RIGHT STRATEGY TO CREATE BOTH NEAR-TERM AND LONG-TERM STOCKHOLDER VALUE – FAR GREATER VALUE THAN BROADCOM'S DRAMATICALLY UNDERVALUED PROPOSAL
Broadcom's proposal is highly opportunistic and dramatically undervalues your Company's leading market position and value creation opportunities.
Qualcomm Has a Clear Path to Creating Significant Near-Term Value
We have a specific game plan and are committed to delivering $6.75 - $7.50 in Non-GAAP EPS by FY 2019 through:
- Continued growth in our core business, driven by our recent wins
- A new $1 billion cost reduction program
- Accretion from our NXP acquisition (or, alternatively, a large share repurchase)
- Resolution of current licensing disputes
As is widely known, we are currently in litigation with Apple. What many stockholders do not realize is that we have binding long-term license agreements with Apple's contract manufacturers. But Apple has required its contract manufacturers to cease paying us despite these existing binding contracts. Apple now continues to utilize Qualcomm's intellectual property for its own profit without paying. In this litigation, Apple is seeking to avoid paying fair value for Qualcomm's intellectual property, rejecting terms that are well established in the industry. Apple has often used such litigation to try to renegotiate with its suppliers, and Qualcomm has taken legal action to enforce our contracts.
While the legal process takes time, we believe we will successfully defend our licensing programs, as we have done in the past.
Qualcomm Stockholders Are About to Benefit from One of the Most Significant Technology Shifts and Market Opportunities in the History of Wireless: 5G
Broadcom's proposal dramatically undervalues Qualcomm's current business. Perhaps as importantly, it gives no value to the transformative 5G value creation opportunity that should play out as 5G is launched globally in 2019 – to the near- and long-term benefit of Qualcomm stockholders. As the driving force behind the next technological revolution, 5G will leverage Qualcomm's technology to create a truly connected world. Qualcomm is 12-24 months ahead of our merchant competitors in the transition to 5G – a result of our innovation and technological advancements. We have already partnered with many companies to bring 5G to market, including Verizon, AT&T and multiple operators globally. We are the partner of choice for infrastructure vendors such as Ericsson, Nokia, Samsung and others. All OEMs and operators working to bring 5G to the market are working with Qualcomm.
