Qualcomm Will 'Fight' Through Restructuring, 'Start Growing Again At Some Point'

Shares of QUALCOMM, Inc. (NASDAQ: QCOM) declined more than 2 percent in after-hours trading after the company announced its restructuring plan. This announcement overshadowed the firm's upbeat earnings results.

"I wouldn't necessarily call this good news," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "It might be good news from an investment standpoint, long-term. You don't like to see a juggernaut like Qualcomm really slowing down and having to adjust their business."

Udall may be concerned about Qualcomm's current position, but he said the firm will "fight their way through" this transition.

"There's so much intellectual property that they have," he said. "They have a great R&D platform. They'll just start making new chips in new areas and start growing again at some point. For right now it's like a slow-growth value stock, as opposed to what they used to be."

Is Qualcomm Getting Squeezed?

Tech industry expert and analyst Jeff Kagan said that as the marketplace evolves and new competitors enter the fray, "It's really squeezing through existing players."

"Qualcomm is one of them," Kagan told Benzinga. "As good as they have done in the past, it's not an indication of how they're gonna do in the future. Apparently they need to make some changes. Whether this is going to be what they need to do or not, we'll have to wait and see."

Kagan doesn't expect the restructured Qualcomm to resemble the company investors once knew.

"I think it's going to be new challenges, [a] new company, new opportunities and we'll have to see how they do," Kagan concluded.

'Stuck A Long Time'

Udall said that Qualcomm "probably has to do this restructuring because the stock's been stuck a long time."

"They do have some business weakness going on," he said. "The thing they've been struggling with for a while is royalty payments from China. In other words, they've been doing a lot of business with China and effectively not getting paid. China's really made life difficult for Qualcomm."

Udall said there are companies in China that are using Qualcomm's technology without paying a licensing fee.

"That's the rub of doing business in China," he added. "It can be really good or really bad."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.