NXP Semiconductors NV Posts Quietly Solid Q4 Growth

By Anders Bylund Markets Fool.com

NXP Semiconductors (NASDAQ: NXPI) reported fourth-quarter results on Wednesday night, a few minutes after the closing bell. Here's how the quarter worked out for the Netherlands-based maker of embedded chips.

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NXP's fourth-quarter results: The raw numbers

Metric

Q4 2016

Q4 2015

Year-Over-Year Change

Revenue (combined with Freescale in Q4 2015)

$2.44 billion

$2.18 billion

12%

Net income

$145 million

$989 million

(85%)

GAAP EPS (diluted)

$0.37

$3.56

(90%)

Adjusted Net Income

$683 million

$341 million

100%

Adjusted EPS (diluted)

$1.99

$1.25

59%

Data source: NXP.

What happened with NXP this quarter?

The pending buyout offer from Qualcomm (NASDAQ: QCOM) hangs heavy over this report, and another business combination that was completed a year ago also complicated NXP's year-over-year comparisons.

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  • The adjusted figures shown do their best to remove costs and windfalls related to the Freescale acquisition from the equation and are probably your best bet for putting this quarter in a historical context. In this light, NXP delivered a strong year-over-year performance.
  • GAAP gross margin landed at 48.7%, up from 38.5% in the year-ago period and 48% in the third quarter.
  • Revenue from automotive solutions increased 17% year over year, compared with year-ago figures including Freescale's pre-merger results. The smaller secure interface and infrastructure segment boosted sales 29% higher on the same basis, while secure-connected-devices revenues edged 10% higher. Meanwhile, secure identification solutions saw sales dropping 35%, mostly because of divestitures in this area that followed from regulatory reviews of the Freescale combination.
  • In the standard products division, itself in the midst of being sold to a consortium of Chinese investors, sales increased by 15%.

In light of the pending Qualcomm transaction, NXP declined to state any forward guidance targets. The company is also skipping the usual earnings call with financial analysts for the same reason.

Image source: NXP.

What management had to say

NXP CEO Richard Clemmer described the fourth quarter as "an important milestone in the resumption of our annual growth trajectory."

Recent revenue growth was held up as evidence of the value NXP's Freescale deal unlocked. The standard products spinoff was said to have received all necessary regulatory sign-offs and should close before the end of the first quarter.

Clemmer also highlighted the promise of broader market reach, strong partnerships, and diverse customer lists under the wing of Qualcomm, but he didn't dive into any new details on the progress of that closing procedure.

Looking ahead

By limiting merger commentary in the press release and canceling the conference call, NXP effectively dodged every question regarding the Qualcomm merger. Qualcomm is running a gauntlet of intense legal issues these days, possibly distracting that management team from sewing up the NXP deal. Meanwhile, uncertainty about the new U.S. administration's attitude toward cross-border mergers on a large scale has led some investors and observers to the conclusion that NXP's deal might be in trouble.

Qualcomm has already floated an official tender offer at $110 per NXP share, attempting to lock in shareholder involvement ahead of schedule. Unless extended by a fresh filing, that offer expires on Monday, Feb. 6. Either way, investors should soon get a progress report on the number of NXP shares that have been tendered under the existing offer.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Qualcomm. The Motley Fool recommends NXP Semiconductors. The Motley Fool has a disclosure policy.