Please ensure Javascript is enabled for purposes of website accessibility

Applied Materials Is Grabbing a New CFO From NXP Semiconductors. That's Great News for...Qualcomm?

By Anders Bylund - Jul 25, 2017 at 7:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Yep, this simple executive move carries more substance than you'd think.

When NXP Semiconductors (NXPI -0.94%) becomes a part of chip giant Qualcomm (QCOM -1.60%) later this year, CFO Dan Durn isn't coming along for the ride. The former financial head of Freescale Semiconductor is moving on to the same role at Applied Materials (AMAT -1.63%) on Aug. 7.

This may look like just another career move, but Durn's move puts NXP one step closer to finalizing the merger with Qualcomm. Here's how.

Two people holding up large puzzle pieces emblazoned with the logos for Qualcomm and NXP

Image sources: Getty Images, NXP, and Qualcomm; edited by the author.

What's the big deal?

Above all else, Durn's farewell is a solid sign that the Qualcomm deal is on the cusp of completion.

In the press release that announced Durn's new plans, NXP CEO Rick Clemmer stopped just short of saying as much.

"His leadership has been a key contributor of the successful integration of Freescale, and directly positioned NXP to successfully prepare for the coming acquisition by Qualcomm," Clemmer stated.

That's simply "the coming acquisition by Qualcomm," with no hedging whatsoever. No "pending acquisition," not a "planned acquisition," nor even an "acquisition awaiting approval by the European Commission." All of these would have been absolutely accurate, and NXP's legal team probably suggested language along those lines. But the press team still felt comfortable with the "coming acquisition" construct, attributed to Rick Clemmer and all.

CEOs don't throw that kind of statement around lightly. We would never see Clemmer put his signature on such a claim unless the Qualcomm deal were close to the final John Hancocks.

Another big clue is the fact that Durn feels free to move on without disrupting the merger process. Put two and two together, and you're suddenly standing right next to a complete Qualcomm merger.

So that's the biggest takeaway I see in Dan Durn's departure.

Why I could be wrong

Sure, this is a solid upgrade from Durn's point of view as well. NXP is a large and well-respected chipmaker that casts a particularly large shadow over the automotive computing and near-field communications markets. The company sports trailing revenues of $9.5 billion and annual EBITDA (earnings before interest, taxes, depreciation, and amortization) profits of more than $2.6 billion.

Applied Materials is still much larger, dwarfing NXP by more than 30% on both the top and bottom lines. So if Durn just wanted to manage a deeper and richer financial machine, the provider of semiconductor manufacturing services certainly fits that bill.

If so, this move means nothing at all for the Qualcomm merger.

Confused businessman, staring at two chalk arrows on the wall that point in opposite directions

Image source: Getty Images.

Why I'm still right

The clues are piling up, and they're more than just Dan Durn's evolving career plans:

  • The group of activist investors who were pushing for a higher buyout price in May and June have fallen eerily silent lately. The group, led by private equity firm Elliott Management, appears to have thrown in the towel already.
  • NXP's share prices have stabilized just below Qualcomm's official cash offer of $110 per share. I mean, the room for deal-pricing arbitrage has fallen to $0.16 per share as of this writing. This is what stock charts look like just before the final buyout papers are signed.
  • And from the other side, Qualcomm has completed its funding for the NXP deal. The company has raised $11 billion of new debt and started to consolidate its overseas cash reserves.

You should keep an eye out for the European Commission's final approval of the NXP-Qualcomm deal any day now, followed by approvals in Japan, the Philippines, and South Korea. The review in China might take longer, but Taiwan already gave this deal the go-ahead. So after China's rubber stamp, it won't be long before we see skyrocketing numbers of NXP shares being committed to Qualcomm's tender offer.

Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of Qualcomm. The Motley Fool recommends NXP Semiconductors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NXP Semiconductors N.V. Stock Quote
NXP Semiconductors N.V.
NXPI
$179.96 (-0.94%) $-1.70
QUALCOMM Incorporated Stock Quote
QUALCOMM Incorporated
QCOM
$147.81 (-1.60%) $-2.40
Applied Materials, Inc. Stock Quote
Applied Materials, Inc.
AMAT
$107.83 (-1.63%) $-1.79

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/09/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.