Qorvo Inc: A Semiconductor Company with Potential for Margin Improvement
Qorvo Inc, a global semiconductor company, is a leading supplier of radio frequency (RF), analog mixed signal, and power management solutions. The company operates through three segments: High Performance Analog (HPA), Connectivity and Sensors Group (CSG), and Advanced Cellular Group (ACG).
Qorvo’s stock has underperformed the industry in recent years, with a stagnant stock price and a low return on investment for shareholders. In contrast, its peer companies such as Broadcom and Skyworks Solutions have reported impressive growth and strong financial performance.
The company’s underperformance is attributed to its inferior gross and operating margins compared to its peers. Qorvo’s gross margin is 39.5%, while its operating margin is 8.3%. In comparison, Skyworks Solutions boasts a gross margin of 44.2% and an operating margin of 24.9%.
Starboard Value, a successful activist investor, has taken a 7.71% stake in Qorvo and has nominated a majority slate of six director candidates to the board for the 2014 annual meeting. Starboard has a proven track record of improving operational efficiency and margin performance at semiconductor companies, with an average return of 85.87% versus an average of 28.91% for the Russell 2000 during the same time periods.
Qorvo has a number of opportunities for improvement, including cost reduction, productivity enhancements, and targeted R&D investments. Starboard has proposed a philosophy of discipline that could lead to more efficient SG&A and targeted R&D, and has helped size capacity for more realistic manufacturing levels by consolidating fabs and using outside foundries for flexibility.
The company’s director nomination window does not open until March 16, 2025, and it is likely that Starboard will engage with the board and management to implement changes that will improve Qorvo’s financial performance and create value for shareholders. With Starboard’s track record and experience in semiconductor companies, the potential for a successful activist campaign is high.
In conclusion, Qorvo Inc is a semiconductor company with potential for margin improvement, driven by the success of Starboard Value, a well-established and successful activist investor. With Starboard’s track record and expertise in the industry, the company has a good chance of turning around its underperformance and creating value for its shareholders.