Starboard invests in Qorvo. How does activists help increase profits

Business: Colo It is a global semiconductor solution supplier. The company operates through three departments: high -performance simulation departments (HPA), connection and sensor departments (CSG), and advanced honeycomb departments (ACG). The HPA department is a global supplier of radio frequency (RF), analog hybrid signals and power management solutions. The CSG department is a global supplier of connecting and sensor solutions. The ACG department is a global supplier for smartphones, wearable devices, laptops, tablets, and other devices to provide honeycomb radio frequency solutions.

Stock market value: ~ $ 8.41B ($ 88.94 per share)

Qorvo is the result of RF Micro Devices (RFMD) and Triquint Semiconductor (TQNT). The transaction was announced in 2017. February 2014 Completion January 2015Essence Starboard is very familiar with Qorvo because the company is a 13D file manager on Trique in 2013. October 29, 2013, Starboard Send a letter Overview the company was underestimated and performed well to Triquint, and put forward value -added suggestions. December 2, 2013, the side side Nominated most list The board of directors of the 2014 annual meeting of the board of directors. However, this cooperation has never evolved into a dispute over agency, because Starboard issued a letter in March 2014 to support the merger proposal of Triquint and RFMD and withdraw from 13D. In less than a year of participation, Starboard’s investment return rate was 113.15%, while the return on investment in Russell 2000 was 23.80%.

This merger showed shareholders the scale advantages of the new company, product portfolio, improved operating model, and cost synergistic effects of $ 150 million, creating new opportunities for mobile devices, network infrastructure, and aerospace and national defense. The announcement caused great excitement, and the stock price of Triquint and RFMD soared about 200%from the day before the announcement to the merger. However, one year after the transaction, the newly established Qorvo stock price fell 27.7%. From a functional point of view, from the day before the consolidation to Starboard Value disclosed its 7.71% shares, the stock transaction was flat, which rose only by 4.5%. When semiconductors have benefited from huge long -term winds in recent years, this is a very amazing performance. During the same period, the Philadelphia SE semiconductor index rose more than 650%.

The opportunity for Qorvo to increase value is very simple. The focus is on operation, and Starboard has done such things many times in many semiconductor companies: increasing profit margins. Although Qorvo has excellent product portfolio and competitiveness with peers Broadcom and Skyworks solutionThe company’s gross profit margin and operating profit margin have been poor. In the last fiscal year, Qorvo’s gross profit margin was 39.5%, and the operating profit margin was 8.3%, while the profit margins of its peers Skyworks were 44.2%and 24.9%, respectively. Although the income level is roughly similar (Skyworks is $ 4.7 billion and Qorvo is $ 3.8 billion), Qorvo uses 10.3% of the income for sales, general and management costs, while Skyworks is 6.6%; the income of 18.1% is used for research and development. Skyworks is 12.7%. In addition, Qorvo also spent an additional $ 104 million (2.8%of the income) for “other operating expenses.” This is one of the main reasons for the board of directors and management teams to discipline, and Qorvo to obtain such a high vulnerability rating in the 13D Monitor loophole rating database.

Each activist has different styles, and the degree of success in different industries and strategies is also different. However, in a semiconductor company with opportunities for profit opportunities, it is difficult to find a more successful combination than Starboard. Starboard has previously launched radical activities at the following 13 semiconductor companies: ACTEL, Micropune, Zoran, DSP Group, MIPS Technologies, Integrated Device TechNology, Tessera, Triquint Semiconductor , Micrel, Integrated Silicon Solution, Marvell, Mellanox Technologies and on Semiconductor. In all these activities, Starboard has received positive return on investment. The average return rate of 13 phases is 85.87%, while the average return rate in 2013 was 28.91%. Russell 2000 In the same time period. In this case, Starboard ’s operation method is to occupy the board seats when necessary, establish disciplinary philosophy to achieve more efficient sales, management and management (SG & A) and targeted research and development, and help increase operating profits. In addition, for companies such as Ansonmei Semiconductors with a low utilization rate, Starboard improves flexibility by integrating wafer fab and using external foundries to help expand production capacity to achieve a more realistic level of manufacturing. There are also the same opportunity here, which may lead to further improvement of profit margins.

We do not doubt that Starboard will want the board seat, and we believe that this should be a fast solution for several reasons. First of all, the experience and performance records of Starboard in the above semiconductor company are impeccable. Secondly, it became a semiconductor company in 2025, and in the past ten years, it deprived of any practical return of shareholders. This is untenable. Third, Starboard has established a cooperative relationship with the three companies of Qorvo Eight directors Including its chairman, when hiring Triquint in Starboard, they are all Triquint’s directors: Walnden C. Rhines (Chairman), David Hy Ho and Roderick D. Nelson. Fourth, among the eight directors of the company, 5 directors have been working on the board of directors for 10 years since Trique / RFMD merged, and one of the (David Hy Ho) has notified his situation to the company. Plan to retire And it is no longer re -election at the company’s next annual shareholders’ meeting. Once you join the board, the representatives and other members of Starboard and other members of the board will have the opportunity to evaluate whether this is a suitable management team to reverse Qorvo’s recent performance. If they decide to need new management, it is worth noting that in recent years, a lot of integration has occurred in the semiconductor industry, which has led many senior and talented operators to wait and see.

Qorvo’s nomination window will not be opened until March 16, 2025. If you fail to reach a settlement before that, we will be very surprised.

Ken Squire is the founder and president of 13D Monitor (a research service agency related to shareholder radicals), and the founder and investment portfolio of 13D Activist Fund (a common fund invested in the aggressive 13D investment portfolio).