Please ensure Javascript is enabled for purposes of website accessibility

How NXP Semiconductors Shares Fell 37% in 2018

By Anders Bylund - Updated Apr 18, 2019 at 4:10PM

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

The long-awaited merger with Qualcomm fell apart at the goal line.

What happened

Shares of NXP Semiconductors (NXPI 3.79%) fell 37.4% in 2018, according to data from S&P Global Market Intelligence. There's no mystery to explore here: NXP's proposed merger with larger rival Qualcomm (QCOM 4.17%) was canceled after nearly two years of negotiations and regulatory concessions. Investors in the embedded-chip maker didn't like that outcome at all.

So what

The original $38 billion buyout offer was launched in October 2016, but stalled for more than a year amid close scrutiny by regulators on three continents. Raised to $44 billion in early 2018 in order to keep NXP's largest shareholders on board, the merger still lacked a crucial final stamp of approval from Chinese regulators. Qualcomm and NXP refiled the application for the deal, but finally ran out of patience and time. On July 26, Qualcomm threw in the towel and sent a $2 billion breakup-fee payment to NXP. Try as they might, NXP and Qualcomm will not move forward as a single company.

Two men hold up large white puzzle pieces, one emblazoned with the Qualcomm logo and one carrying NXP's colors.

These puzzle pieces were never allowed to connect. Image sources: Getty Images, NXP, and Qualcomm.

Now what

This deal was probably a direct victim of trade tensions between Chinese and American leaders. Qualcomm will have to struggle on without NXP's automotive computing solutions and IoT (Internet of Things)-ready security and networking chips, which would have provided a dramatic boost to the larger company's portfolio in these key high-growth areas.

As for NXP, the company quickly repurchased 14% of its own shares and got back to the same business it has been running for years -- focused directly on some of the most exciting growth markets in the tech sector today. The stock now trades at 47% below Qualcomm's proposed acquisition prices, but hasn't lost any of the business prospects that inspired the buyout proposal in the first place. I bought some shares of NXP in August to take advantage of these downright silly share prices. Since then the discount has only grown larger, for all the wrong reasons.

Check out the latest NXP Semiconductors earnings call transcript.

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.
$159.32 (3.79%) $5.81
QUALCOMM Incorporated Stock Quote
QUALCOMM Incorporated
$125.10 (4.17%) $5.01

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

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.