CEO Transition Won't Affect Qualcomm's 5G Leadership

On Jan. 5, Qualcomm QCOM announced that CEO Steve Mollenkopf will step down on June 30, with current president Cristiano Amon taking his place. Mollenkopf has been CEO of Qualcomm since 2014 and has helped steer the firm through a number of challenges with its licensing business, including regulatory scrutiny from numerous countries and customer backlash (most notably from Apple). Additionally, the firm successfully dealt with an activist investor, thwarted a hostile takeover attempt by Broadcom, and navigated the failed acquisition of NXP over the course of Mollenkopf’s tenure. With all major handset original equipment manufacturers under license, including over 110 5G agreements, and Qualcomm also winning an appeal in the U.S. antitrust suit over its licensing business against the U.S. Federal Trade Commission, we view the company's licensing business as being stabilized. Management anticipates a midpoint of 500 million 5G smartphones to be shipped in 2021, with many featuring substantial chip content from Qualcomm. We believe Amon, who has been with Qualcomm for the majority of his career, will be able to maintain the firm’s current strategy of capitalizing on its 5G leadership and diversifying beyond smartphones into automotive and the Internet of Things. Our fair value estimate for narrow-moat Qualcomm remains $124 per share, and we recommend prospective investors wait for a pullback.

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