Qualcomm Inc. (QCOM – Analyst Report), the world’s leading chipset maker for mobile handsets, has confirmed the sale of its subsidiary, Omnitracs Inc., to Vista Equity Partners, a U.S.-based private equity firm.
In August this year, Qualcomm signed a definitive agreement with Vista Equity Partners to sell Omnitracs for $800 million in cash. The deal was expected to be closed by the fourth quarter of 2013 (first quarter of Qualcomm’s fiscal 2014), subject to customary regulatory approval.
Omnitracs manufactures chips and accessories to provide data and other systems for the transportation and logistics business. This business is popularly known as fleet management and telematics services.
Founded in late 1980s, Omnitracs is one of the initial business ventures of Qualcomm which has had a successful run for several years. Meanwhile, Qualcomm has developed itself as a leading chipset manufacturer in the mobile handset segment. As a result, Omnitracs has become a non-core unit of the company.
Qualcomm exited the fourth quarter of fiscal 2014 with $29.4 billion of cash and marketable securities and no outstanding debt on its balance sheet. Thus, we believe that the cash generated from the sale of Omnitracs unit will further strengthen the company’s cash position.
Qualcomm’s mobile chipset business has already gained significant traction and is widely used in Google Inc.’s (GOOG – Analyst Report) Android devices and Apple Inc.’s (AAPL – Analyst Report) iPhones. Last year, the company secured the third place in the semi-conductor industry, behind the market leaders Intel Corporation (INTC – Analyst Report) and Samsung Electronics. We believe that the company will continue to perform well buoyed by significant surge in the demand for smartphones and tablets.
Currently, Qualcomm carries a Zacks Rank #2 (Buy).