Activist investor Starboard Value sees substantial upside potential in Skyworks Solutions (NASDAQ: SWKS) following its merger with Qorvo, as the wireless chipmaker targets significant cost reductions and improved profitability, Bloomberg News reported Monday, citing people familiar with the matter.
Starboard believes Skyworks shares remain undervalued despite the completion of its acquisition of Qorvo earlier this month. The investment firm expects the combined company to unlock additional shareholder value by achieving its financial targets and capitalizing on opportunities across the semiconductor industry.
According to the report, Starboard sees considerable growth potential in the complementary product portfolios of Skyworks and Qorvo. The combination could strengthen the company's competitive position in wireless communications, radio-frequency technology and semiconductor solutions used in smartphones and other connected devices.
A major component of the merger strategy involves generating at least $500 million in annual cost savings within three years. These savings are expected to come from operational efficiencies and the integration of the two businesses.
Management has also outlined plans to achieve operating margins between 30% and 35% over the next two to three years. Meeting these profitability targets could significantly improve the combined company's financial performance and strengthen investor confidence.
Starboard reportedly believes the market has not fully accounted for the potential financial benefits of the merger, suggesting that successful execution could support a higher valuation for Skyworks stock.
Skyworks agreed to acquire Qorvo last year in a transaction that valued the combined semiconductor business at approximately $22 billion. The deal brought together two major suppliers of wireless connectivity chips at a time when both companies were navigating slower growth and changing customer demand.
One significant challenge has been Apple's transition toward internally developed chips, which has created uncertainty for semiconductor suppliers historically dependent on the technology giant.
By combining their operations, Skyworks and Qorvo aim to diversify their capabilities, improve cost efficiency and strengthen their position in the competitive wireless semiconductor market.
Investors will likely focus on the company's progress toward its $500 million savings target and projected operating margins as key indicators of whether the merger can deliver the shareholder value anticipated by Starboard.
