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Qualcomm (QCOM) Eyes Firm ADAS Footing, Snaps Up Veoneer

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Qualcomm Incorporated (QCOM - Free Report) has inked a definitive agreement with SSW Partners to acquire Veoneer, Inc. (VNE - Free Report) in an all-stock deal worth $4.5 billion, or $37.00 per share. The transaction is likely to be completed in 2022, subject to mandatory regulatory approvals and other closing conditions. The transformative deal is expected to offer Qualcomm a firmer footing in the emerging market of driver-assistance technology, as it aims to extend the Snapdragon Ride Advanced Driver Assistance Systems (ADAS) portfolio.

Per the deal, New-York based investment firm SSW Partners will first acquire all the shares of Veoneer and then sell its Arriver business to Qualcomm, while retaining its other Tier-1 supplier businesses until it finds strategic partners to offload the same. Based in Stockholm, Sweden, auto component supplier Veoneer offers automotive radars, mono-and stereo-vision cameras, night driving assist systems, ADAS, electronic control units, airbag control units, crash sensors, seat belt pre-tensioner electronic controllers, and ADAS software for automated and autonomous driving.

The Arriver business of Veoneer operates the dedicated software unit focused on sensor perception and drive policy, including a full stack of features and functions. It was born out of a collaborative agreement with Qualcomm and leveraged the chipmaker’s Snapdragon Ride SoC hardware to emerge as a leading ADAS solution provider in the auto industry. The platform addressed the increasing demand for automation capabilities within the automotive ecosystem, driven by higher requirements for scalable and upgradable solutions that require highly advanced and power-efficient compute, connectivity, and cloud service capabilities across all vehicle tiers.

With the acquisition, Qualcomm aims to incorporate Arriver's Computer Vision, Drive Policy and Driver Assistance assets into its ADAS portfolio to deliver an open and competitive platform for automakers to better compete with rivals within the self-driving vehicle market. This, in turn, is likely to augment its automotive business as it strives to boost revenues beyond chipmaking for the smartphone market.

Qualcomm is reportedly the only chipset vendor with 5G system level solutions spanning both sub-6 and millimeter wave bands and one of the largest RF (radio frequency) front end suppliers with design wins across all premium-tier smartphone customers. It is one of the largest manufacturers of wireless chipset based on baseband technology. The company is focusing on retaining its leadership in 5G, chipset market and mobile connectivity with several technological achievements and innovative product launches. The chip manufacturer is likely to help users experience a seamless transition to superfast 5G networks, delivering low-power resilient multi-gigabit connectivity with unprecedented range and best-in-class security. This is likely to offer the flexibility and scalability needed for broad and fast 5G adoption through accelerated commercialization by OEMs.  

The stock has gained 6% in the past year compared with the industry’s growth of 17.6%.

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Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. A couple of better-ranked stocks in the industry are Clearfield, Inc. (CLFD - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Motorola Solutions Inc. (MSI - Free Report) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Clearfield delivered a trailing four-quarter earnings surprise of 49%, on average.

Motorola has a long-term earnings growth expectation of 9%. It delivered an earnings surprise of 11.6%, on average, in the trailing four quarters.