It's a great day for trolling Qualcomm. More posts to come later today. Don't forget - sign up for our free daily newsletter to stay in the activist investing know.
To start, if Qualcomm does break up, undoubtedly, one company will be a patent troll. We've talked about how JANA Partners couldn't save Qualcomm and that's becoming more evident.
If the company does split we'd be left with a large patent business and a chip maker. The patent business is valuable, worth upwards of $90 billion, and more than the $75 billion or so that the chip-making business is worth. Notice that, yes, the combined value is a premium to where the company is currently at. It's unlocking or realizing that value that's tough.
Patents make up most of the profits and we've been here before, with the company looking into a split nearly a decade ago. It gave up. But now the markets are clamoring for spinoffs and breakups. It's just tough to see how the market will receive what will be the largest non-business, non-operating, entity that will be Qualcomm's patent business. It wouldn't make any products.
Most of the major patent trolls are only worth a couple billion dollars in market cap. It's been hard to find support for patent trolls in the market, with patent reform being a hot topic.
Nonetheless, Qualcomm's patent business would likely become buyout bait for a company that knows how to run patent battles much better.