Merger Arbitrage Blog

Buy NXPI on Qualcomm Weakness For A Short Term Trade

I just bought a little NXPI at $96.77 after Qualcomm recent weakness regarding the FTC and Apple lawsuits. I believe the merger will still go ahead regardless of the lawsuits. I am buying NXPI now as a short term trade to sell around $100 as the price will return to this level once the news on the lawsuits cool down and investors realise that Qualcomm will still be earning lots of cash.

Qualcomm is buying NXP Semiconductors to diversify from its core modem chip and IP business that is causing the troubles recently. NXPI specialises in chips and sensors used in cars and Internet of Things chips. These will be Qualcomm’s future revenue source and the products will form vertical products nicely with Qualcomm’s existing products and IPs. In short, Qualcomm is buying NXPI no matter what troubles it had on hand now because Qualcomm is buying its future.

The only wildcards are European and China regulatory clearance, especially China, who will be keen to protect their homegrown companies from foreign monopolistic companies. Already, alot of china cars are using NXPI’s chips and merging NXPI with Qualcomm will increase the dependance of homegrown companies on the whims of Qualcomm.

Updated: January 23, 2017 — 3:14 pm

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