Starboard has participated in Qorvo. How an activist can help improve the margin

Business: Qorvo is a global supplier of semiconductor solutions. The company operates in three segments: high performance analogue (HPA), communication and sensors (CSG) and Advanced Cellular Group (ACG). The HPA segment is a global radio frequency supplier (RF), analogue mixed solutions and energy management. The CSG segment is a global supplier of connectivity and sensors solutions. The ACG segment is a global provider of RF solution cells for smartphones, wearing devices, laptops, tablets and other devices.

Stock: ~ USD 8.41 billion (USD 88.94 per share)

Qorvo was created as a result of a connection equal in total transactions between the micro RF (RFMD) and Triquint (TQnt) semiconductor, which was announced in February 2014 and completed in January 2015. The Starboard is very familiar with Qorvo, taking into account that the company was a 13D filter at Triquint in 2013. October 29, 2013, Starboard He sent a letter In order for Triquint out of underestimation of the company, worse results and present proposals to increase value. December 2, 2013 Starboard appointed a majority board Of the six directors of directors for the board for the annual meeting in 2014, however, commitment never went to a substitute fight, because the Starboard issued a letter supporting the proposed Triquint from RFMD in March 2014 and left 13d. In a smaller year, Starboard achieved 113.15% of the investment refund compared to 23.80% for Russell 2000.

The connection was transferred to shareholders as an opportunity to create new development opportunities in mobile devices, network infrastructure as well as flights and defense, strengthened by the advantages of the scale of a new company, product portfolio, improved operating model and $ 150 million synergy of costs. The advertisement met with great excitement, because Triquint and RFMD shares increased by about 200% from the day before the announcement of their combination. However, a year after transactions, the newly created Qorvo fell by 27.7%. For a decade, from the end of the fusion to the day before the right value on the right side, revealing its shares 7.71%, the actions traded the apartment, which is only 4.5%. This is quite stunning lower results when semiconductors were beneficiaries of huge secular winds in recent years. At the same time, the Philadelphia SE semiconductor indicator increased by over 650%.

The possibility of improving the value in Qorvo is simple, operating, and something that the starboard does many times in many semiconductor companies: improving the margin. Despite the perfect Qorvo product portfolio and competitiveness with peers Broadcom AND Skyworks solutionsCompanies outline and operational margins were worse. In the last financial year, Qorvo had a 39.5% gross margin and an operational margin of 8.3%, while his peer skyworks boasted 44.2% and 24.9%, respectively. Despite more or less similar levels of income ($ 4.7 billion for Skyworks and $ 3.8 billion at Qorvo), Qorvo spends 10.3% of revenues for sale, general and administrative expenses compared to 6.6% for Skyworks and 18, 1% of revenues in R&D compared to 12.7% to skyworks. In addition, Qorvo spends an additional USD 104 million (2.8% of revenues) on “other operating expenses”. It is a glaring signal of the management board and the management team that needs discipline, and one of the main reasons why Qorvo received such a high vulnerability assessment in the susceptibility database of susceptibility to the susceptibility 13D monitor.

Each activist has a different style with different levels of success in all industries and strategies, but it is difficult to find a more successful combination than a starboard in a semiconductor company with the possibilities of improving the margin. Starboard has previously started activist campaigns in the next 13 semiconductor companies: Acel, Microtune, Zoran, DSP Group, MIPS Technologies, integrated technologies of devices, Tessera, Triquint Semiconductor, Micrel, integrated silicon solution, Marvell, Mellanox Technologies and on a ponder. In all these campaigns, the Starboard had a positive return on investment, and the average return of 13 is 85.87% compared to the average 28.91% Russell 2000 in the same periods. In such situations, Modus Operandi Starboard took space on board, if necessary, he established the philosophy of discipline, which leads to a more efficient SG&A as well as targeted research and development, and helps improve surgical margins. In addition, in companies such as a semiconductor that operated at a low level of use, the Starboard helped the size of the size for more realistic production levels by consolidating FAB and the use of external foundry for flexibility. Here there is the same chance that can lead to an additional improvement in the margin.

We have no doubt that the starboard will need places on board and we think that for several reasons it should be a quick settlement. First of all, the impressions and achievements of Starboards in semiconductor companies described above are not introduced. Secondly, in 2025, you can defender in 2025, who deprived her shareholders of every real return in the last ten years. Third, the starboard already has reports with three Qorvo's Eight directors Including its chairman, all of whom were the directors of Triquint, when the starboard: Walden C. Rhines (chairman), David Ho Ho and Roderick D. Nelson got involved. Fourth, eight directors of the company, five were sitting on the board for 10 years from the merger of Triquint /RFMD, and one (David Ho Ho) informed about his company about his company intention to retire And it does not mean re -election at the next company's annual meeting. After the Starboard representatives and the rest of the board on the board will be able to assess whether this is the right managing team to transform the last Qorvo results. If they decide that new management is needed, it should be noted that in recent years there has been a huge consolidation in the semiconductor industry, which caused many older and talented operators on the pitch.

The Nomination window of the Qorvo director does not open only on March 16, 2025 and we would be very surprised if the settlement was not achieved earlier.

Ken Squire is the founder and president of the 13D monitor, institutional research service for shareholders activists and the founder and head of the 13D Activist Fund portfolio, an investment fund that invests in the portfolio of 13D activists.