Investing.com-- Starboard Value has accumulated a 7.7% stake in Qorvo Inc (NASDAQ:QRVO), the Wall Street Journal reported on Thursday, with the activist investor seeking changes to boost the company’s weak share price.
The stake is worth about half a billion dollars, and is expected to be revealed in a securities filing on Friday, the WSJ report said.
Qorvo’s shares rallied more than 7% in premarket trading Friday.
Qorvo- which was formed in 2015 through the combination of TriQuint Semi and RF Micro Devices- competes with the likes of Qualcomm (NASDAQ:QCOM) and Broadcom (NASDAQ:AVGO) in developing chips for wireless and wired communications, as well as in energy applications.
But the company’s shares have vastly lagged their peers over the past year, given that despite its status as a chipmaker, Qorvo has limited exposure to the artificial intelligence industry, which was a major value driver for chipmakers in recent years.
Qorvo’s shares are trading down about 27% in the past year, while Broadcom’s shares more than doubled in value. Qualcomm is also trading up about 14%.
According to Wells Fargo (NYSE:WFC) analyst Andrew Rocha, much of Qorvo’s troubles stem from its significant exposure to the smartphone market, where the firm faces macroeconomic pressures, competition in China, and shifts in demand at major customers like Samsung (KS:005930) and Apple (NASDAQ:AAPL).
“The big question here is what can Starboard do to fix the QRVO problem," Rocha said. "Well, you may make the case they have a market problem, i.e. too much exposure to smartphones. You only fix that by growing organically elsewhere, or M&A.”
Starboard has a history with Qorvo, having acquired an 8% stake in TriQuint in 2013. The firm pushed for significant operational and strategic changes, including a shift to a capital-light model.
While the activist investor’s focus this time is unclear, Rocha suggests that measures such as reducing operating expenses, exploring divestitures, or pivoting further into Apple’s ecosystem could be among the strategies pursued.
He also highlighted the broader challenges Qorvo faces in a consolidating industry. “I think splitting up QRVO’s smartphone business from its analog and sensors business would leave both businesses smaller and less well-capitalized in a semis world that is increasingly consolidated," Rocha noted.
In addition to technology, Starboard invests in a variety of sectors, having recently taken stakes in Pfizer (NYSE:PFE) and Kenvue (NYSE:KVUE).
Ambar Warrick contributed to this report.