Qualcomm CEO: Hoarding cash necessary to compete
Despite shareholder calls for buybacks or a dividend boost, Qualcomm CEO Paul Jacobs says that the company's cash stockpile is necessary for future innovation.
As reported by Bloomberg, the chief executive officer says that while he is listening to shareholder requests, his focus is on protecting the firm's future competitiveness in the mobile processor market.
In July, Qualcomm reported Q3 net income of $1.58 billion with earnings of 90 cents per share. Non-GAAP earnings were $1.03 per share on a revenue of $6.24 billion. Wall Street analysts were hoping for earnings of $1.03 per share on a revenue of $6.05 billion.
While Qualcomm's outlook is going up, the mobile chip maker also has cash reserves of over $30 billion. However, the U.S.-based company has no intention to follow other companies in creating debt in order to give money to investors.
Apple, for example, took a $17 billion plunge into the debt market as part of a $100 billion capital return program for shareholders. The tech giant plans to buy back $60 billion in shares, which will raise shareholder dividends over the next two years. Although the bond sale originally attracted so many orders that brokers struggled to cope, millions have since been wiped off bond value.
Jacobs told the publication:
"People come to you and say things like, 'Why don't you lever up to buy back your stock?.' My answer to that is, we're not only investing in the current business but we're investing in new opportunities."
By keeping cash in reserve and remaining debt-free, the leader of the San Diego-based firm -- now one of Standard & Poor's fastest-growing technology companies -- believes that even if the economy worsens, the mobile chip maker will remain in good stead to dominate the market.
"Having a good war chest makes people realize you have the ability to absorb a good blow and come back," Jacobs said. "We want to drive the new technology into the market as quickly as possible."
Qualcomm is aiming to keep at least $5 billion in reserve, but has over double this amount stored overseas. The CEO said that the United States must change its high-taxation policies for bringing money back to the firm's homeland, or the balance will stay abroad -- the same tactic used by Apple to avoid business rates of 35 percent.