Qualcomm Postpones Sharp Investment

Qualcomm Inc. (QCOM - Analyst Report) has postponed its second installment of nearly 5 billion yen ($53 million) to be paid to the loss-bearing Japanese TV manufacturer, Sharp Corporation. The installment – expected to be made by the world’s leading chipset maker for mobile handsets by Mar 29 – is now slated for Jun 30.

In Dec 2012, Qualcomm decided to invest 10 billion yen ($120 million) in two installments. The first 5 billion yen was paid through a private placement of new shares at the end of 2012 and the remaining was scheduled until the production of a new panel. The agreement will also facilitate Qualcomm to build new power-saving screens using Sharp's IGZO technology.

However, Sharp Corporation failed to meet the above condition. This has resulted in a delay in Qualcomm’s second round of installment.

An increased supply of TV sets coupled with stiff competition from other TV manufacturers like Sony Corporation (SNE - Snapshot Report) and Samsung Electronics have hugely affected the Sharp’s business, resulting in continued revenue decline in the last few quarters. Moreover, the company requires nearly $2.1 billion by the end of Sep 2013, to pay off its convertible bond holders.

So, the investment from Qualcomm and the recent sale of a 3.08% stake in Samsung for $112 million will boost Sharp’s cash position to some extent. Moreover, Sharp also plans to sell its Chinese TV assembly plant assets to Lenovo Group Ltd and its Mexican TV factory to Hon Hai, in an attempt to improve its cash flow.

Currently, Qualcomm carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other stocks to consider in the semiconductor industry are Texas Instruments Inc. (TXN - Analyst Report) and Broadcom Corp. (BRCM - Analyst Report). Both these companies have beaten the Zacks Consensus Estimates in the most recent quarter and currently have a Zacks Rank #3 (Hold).