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Qualcomm abandons NXP acquisition plans, picks up $2 billion tab

The silence of Chinese regulators has become deadly for the deal.

Qualcomm has formally abandoned plans to acquire NXP Semiconductors.

The US chip maker's third fiscal quarter results, posted yesterday, proved fruitful. Qualcomm reported earnings of earnings of $1.2 billion, or 82 cents a share, on revenue of $5.6 billion, up six percent year-over-year.

However, Qualcomm also used the earnings release to issue a stark warning on the acquisition of NXP -- unless the situation rapidly changed, it was likely to be abandoned.

Qualcomm first announced plans to acquire NXP back in 2016. Qualcomm sweetened the deal with an offering of $127.50 per share in February at the same time as Broadcom's hostile takeover attempt.

The $44 billion price tag was keenly accepted by both Qualcomm and NXP investors. However, the deadline to complete on the acquisition has been pushed back time and time again due to regulatory delays.

In order for the stalled buyout to complete, the consent of nine global regulators was required. Chinese authorities were the last group that needed to assent to the deal, although reports suggested last month that approval had finally been granted.

It was not to be, it seems.

The US and China are embroiled in a trade tariff war, the deadline -- 11:59 pm New York time 25 July -- has now passed, Chinese regulators have remained silent and approval has not been obtained, which has left Qualcomm and NXP no closer to completion.

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Constant delays, stalling regulators, and a trade tariff dispute which is involving entire countries and far more than just one acquisition deal has left the company, perhaps, with little choice in how to move forward.

Qualcomm has now formally walked away from the deal and will pay a termination fee of $2 billion to NXP on 26 July.

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"Our core strategy of driving Qualcomm technologies into higher growth industries remains unchanged," said Steve Mollenkopf, Qualcomm CEO. "We will continue to focus on our strong momentum in these growth industries with projected revenues of approximately $5 billion for fiscal year 2018, up greater than 70 percent from fiscal year 2016."

"We believe our technology leadership and disciplined execution will drive significant value creation for our stockholders," the executive added.

Qualcomm was keen to emphasize in the announcement that despite the failed deal, the firm's prospects still look bright -- particularly in IoT, automotive, mobility, and 5G technologies.

The company has also announced a stock repurchase program worth $30 billion, which replaces Qualcomm's current $10 billion repurchase program. The tech giant expects the majority of the scheme to be executed by the end of FY 2019.

NXP said it will repurchase $5 billion in shares following the abandonment of the deal.

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