Nxp Semiconductors N.V. (NXPI)

[BorisB]

Qualcomm (via NXP Semiconductor)

I've long admired mobile chip power Qualcomm (NASDAQ: QCOM) on its own merit, and its recent decision to acquire IoT semiconductor leader NXP Semiconductor (NASDAQ: NXPI) is one of the smartest tech buyouts in recent memory.

NXP Semiconductor's leadership across several growing sub-segments of the semiconductor market should prove a long-term financial tailwind for Qualcomm investors. Though NXP's revenue base is roughly a quarter the size of Qualcomm, NXP's impressive 25% profit margin should help diversify Qualcomm's own shrinking, but still sizable, margin profile.

Furthermore, NXP's deep specialization in secure connections also leaves the door open for future product development in areas few can predict in the decades to come. As the market for secure connected chips continues to grow and spawn new product verticals, NXP and Qualcomm figure to benefit mightily from the continued rise of the Internet of Things. Better yet, Qualcomm's 17 times price-to-earnings ratio is surprisingly cheaper than the broad market indices, and its 3.1% dividend yield offers another compelling driver of potential returns.

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