Qualcomm narrowly re-elects 10 directors to board: source

By Stephen Nellis

(Reuters) - Qualcomm Inc shareholders on Friday re-elected 10 directors to the mobile chipmaker's board with tepid support in the wake of an extraordinary turn of events that left shareholders with no other choices and at least one advisory firm urging a protest vote.

Some directors were elected with more than 50 percent of the vote while the rest received support in the 40-percent range, according to a source familiar with the preliminary results of the shareholder votes.

Company leaders said they believed Qualcomm's $44-billion bid for chipmaker NXP Semiconductors remained on track for approval by Chinese regulators, but said that the business environment in the country was hard to predict amid escalating trade tensions.

 

The re-election at the annual meeting follows U.S. President Donald Trump's move on March 12 to block Broadcom Ltd's $117-billion hostile takeover bid for Qualcomm on national security grounds, and bar its nominated directors from joining its board.

Qualcomm last week said its board would shrink to 10 directors from 11 because former chairman Paul Jacobs, the son of Qualcomm's co-founder, would not be renominated for the board after disclosing his intention to pursue an acquisition of the firm.

Qualcomm did not disclose on Friday how many votes its directors received at the annual meeting. Its shares were down 1.2 percent at $54.93 in midday trading.

There have been signs that some Qualcomm shareholders were in favor of Broadcom's offer. Broadcom officials said that about 15 percent of Qualcomm shareholders had favored its bids in early vote counting.

Ahead of Friday's meeting, Institutional Shareholder Services, a shareholder advisory firm, urged investors to lodge protest votes for Broadcom board nominees, even though they would not be counted under the company's rules.

'KIND OF QUESTIONABLE'

"Anything below 80 percent to 90 percent of votes cast is kind of questionable," said Kevin McManus, vice president and director of proxy services for Egan-Jones Proxy Services.

"Forty percent is very questionable. The President has created some breathing room for Qualcomm. Hopefully, they will use it wisely and improve both their Board and company."

At the meeting, Qualcomm Chief Executive Steve Mollenkopf reiterated the company's strategic plans, originally outlined in January, calling for the completion of its $44 billion bid for chipmaker NXP Semiconductors, resolution of its legal dispute with Apple Inc and a $1-billion reduction in costs. All of that, Qualcomm executives say, should allow the company to bring in earnings per share of $6.75 to $7.50 for fiscal 2019.

Qualcomm's NXP acquisition still needs approval from Chinese regulators. In response to a shareholder question about those approvals, Don Rosenberg, Qualcomm's legal chief, said that Qualcomm had been "actively engaged" with Chinese regulators "as recently as this week."

CEO Steve Mollenkopf said he believed the company would close the NXP deal on schedule and noted he was headed to China for a conference immediately after the shareholder meeting. But in response to separate shareholder question about US-China relations, he said Qualcomm has little visibility into broader trends between the two nations.

"This is a little bit of uncharted territory for all of us," Mollenkopf said. "We have developed a strong China-friendly, U.S.-friendly business model."

One shareholder asked whether Qualcomm planned to return some or all of its offshore cash to shareholders "who have seen the shares go up to $80 and now is at $55" but "have been faithful. How about a little of that (cash)?"

Qualcomm CFO George Davis said the company's offshore cash was already earmarked for use in the NXP deal.

"That doesn't sound close to $80," the shareholder replied after Davis spoke.

Davis pointed to the company's earnings plans for 2019. "That probably sounds more like $80," Davis said.

(Reporting by Stephen Nellis; Editing by Bill Rigby and Nick Zieminski)