They didn't get the key Apple (AAPL) contract, so Qualcomm's (QCOM) stock went down. It was a bad loss. Maybe it can get back in at another time. But, nonetheless, it didn't go its way, which means the stock should be sold and another stock be bought.
Or it at least, it used to mean that. Not anymore. Now it means someone comes calling -- in this case, Jana Partners -- to say it was never the Apple contract that mattered anyway. It's the corporate structure. If you fix the corporate structure, you get more value.
There are two things remarkable about this development. The first is that if Apple had given Qualcomm the contract, then the corporate structure would be meaningless. Who cares, if they won?
The second is that Jana didn't just say, "look, this isn't worth the effort. I want to go with a winner, not a loser. I want to go with the guys who had the smarts and the style to win the largest contract out there, instead of losing it to an actual rival, not just of itself but also of Apple."
But that's not how the new world of activism works. Or at least, this portion of the new world. There are no real losers in the new world. There are only companies with lots of cash who win good business, and others with lots of cash who lose good business, but have good balance sheets and aren't able to figure out how to bring out the value of a losing enterprise, at least when it comes to the Super Bowl of chip-making.
The concept of selling, or giving up, or just saying "forget it, who needs this headache?" is gone. The notion that management haven't seen this idea already or haven't thought of it -- which I am sure Qualcomm's management have -- is also missing.
The old "take your bat and your ball and go home" scenario has left the building.
Now, I will say two things about this. First is that it does make the game intriguing. Jana just made it better for everyone else who owns Qualcomm's stock, because they were wrong until now. When I say wrong, I mean they didn't own NXP Semiconductors (NXPI) or Skyworks (SWKS) or Avago (AVGO). They own the "wrong" semi, the one who blew it. Secondly, management will, in the end, have to accede to Jana's wishes because their stock goes higher because of Jana, and they don't want to deliberately send their own stock lower.
It's a win-win for Jana, too.
My question is: why don't more do what Jana's doing?
And here is how it is answered: First, because stock-picking managers accept they are wrong and move on. Second, because many hedge funds and mutual funds and pension funds just try to index or faux index -- with small, hopefully better tweaks.
They recognize losses and losers and move on and never dream of them as winners and try to make it happen.
In other words, Jana is as much a function of the refusal to faux index as it is the desire to make right of might -- the might of the balance sheet.
Is it a good thing? I think, in terms of the old style. It's good because it drives the stock higher. Frankly, as a commentator and a tiny shareholder for my trust -- if I own a winner, and I wouldn't have recognized Qualcomm as one of those, so we didn't own it -- I have no choice but to go with the breeze short-term. I can't wait until Qualcomm finds ANOTHER way to be a winner.
So, the answer is a simple one: I don't have to wait. Jana will do it for me. Therefore, it's good.
And it's as simple as that.