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Why Is the CFO Important for Qualcomm and Intel Investors?

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Apr. 3 2019, Published 9:12 a.m. ET

Intel eyed Qualcomm’s veterans 

For a long time, Intel (INTC) eyed Qualcomm’s (QCOM) veterans. Intel hired Qualcomm veteran Murthy Renduchintala in November 2015 to improve its Internet-of-Things strategy. Intel benefited from hiring Renduchintala. Intel got orders for modem chips for Apple’s (AAPL) iPhones from Qualcomm.

When Intel was searching for a new CEO in 2018 after Brian Krzanich resigned, two of Qualcomm’s veterans were reportedly on the list of shortlisted candidates.

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According to a Bloomberg report, Qualcomm’s former COO Sanjay Jha and its former head of the Datacenter division Anand Chandrasekher were on the list of shortlisted candidates for t Intel’s CEO. Intel moved its CFO Bob Swan to the CEO position. The company hired Qualcomm’s CFO George Davis as its new CFO.

What’s going on at Qualcomm?

In addition to Davis leaving, Qualcomm has been impacted by several legal headwinds. Legal issues are impacting the company’s finances. Qualcomm’s cash flows have more than halved. Apple blocked its licensing payments to Qualcomm amid a licensing dispute. Several regulatory fines pushed the company’s cash flow to negative in a few quarters. Adding to the burden, high legal expenditure reduced Qualcomm’s net income and pushed its return on equity to -30.7% in fiscal 2018.

Qualcomm’s failed NXP Semiconductors (NXPI) acquisition increased the company’s balance sheet leverage. The company is using the $30 billion in cash accumulated for the acquisition for stock buybacks. Spending the money on stock buybacks might not fetch long-term gains for Qualcomm. The company promised shareholders that it would deliver an EPS of $6.75–$7.50 in fiscal 2019 to fend off a hostile takeover by Broadcom (AVGO) in early 2018.

Davis leaving Qualcomm isn’t a positive sign. The company’s management has been under pressure from shareholders to improve its returns. Qualcomm stock could decline on April 3.

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