SAN DIEGO (Reuters) - Qualcomm Inc (QCOM.O) re-elected its board of directors on Friday with weak support from shareholders, who grilled the U.S. chipmaker over its strategy following its successful defense against a $117-billion hostile bid from Broadcom Ltd (AVGO.O).
Qualcomm has been under pressure to defend its decision to take Broadcom’s bid to a U.S. national security panel for review. This resulted in U.S. President Donald Trump blocking the deal earlier this month over concerns the acquisition would set the United States back in its race against China to develop 5G wireless technology.
The re-election of Qualcomm’s directors was not in doubt on Friday given that Trump had ordered Broadcom to drop its challenge to Qualcomm’s board and withdraw its nominees. However, the investor support the Qualcomm directors received was lower than in most cases where directors run for election unopposed.
Some of the directors were elected with more than 50 percent of the vote. The rest, including Qualcomm Chief Executive Steve Mollenkopf, received support in the range of 40 percent to 50 percent, according to sources familiar with preliminary results of the shareholder vote.
“Anything below 80 percent to 90 percent of votes cast is kind of questionable, 40 percent is very questionable. (Trump)has created some breathing room for Qualcomm. Hopefully, they will use it wisely and improve both their Board and company,” said Kevin McManus, vice president and director of proxy services for Egan-Jones Proxy Services.
Ahead of Friday’s meeting, Institutional Shareholder Services Inc, a shareholder advisory firm, had urged investors to lodge protest votes for Broadcom’s withdrawn board nominees, even though they would not be counted under the company’s rules.
Mollenkopf told investors following the company’s rejection of Broadcom’s bid that he could achieve earnings per share of $6.75 to $7.50 in fiscal 2019, through a number of measures, including a $1-billion cost reduction program and the resolution of licensing disputes, including with Apple Inc (AAPL.O).
One shareholder at the meeting 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 company’s $44-billion acquisition of chip maker NXP Semiconductors NV (NXPI.O), which is pending clearance from Chinese regulator MOFCOM.
“That doesn’t sound close to $80,” the shareholder responded. Davis pointed to the company’s earnings goal for its fiscal 2019. “That probably sounds more like $80,” Davis said.
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