By Susan Heavey and Sonam Rai
WASHINGTON/BENGALURU (Reuters) - NXP Semiconductors (O:NXPI) followed Qualcomm Inc (O:QCOM) in announcing share buybacks worth billions of dollars on Thursday as the companies sought to compensate investors for the collapse of their $44 billion (33.46 billion pounds) merger due to Chinese opposition.
U.S. Treasury Secretary Steven Mnuchin said it was unfortunate that China had not granted regulatory approval for the deal, seen by analysts as the quid pro quo for concessions made by Washington on Chinese phonemaker ZTE (SZ:000063).
"I'm very disappointed that they didn't get regulatory approval," Mnuchin told CNBC in an interview.
"I think this is another example of where it was approved in every single other territory. We're just looking for U.S. companies to be treated fairly."
Qualcomm shares rose 4 percent in morning trade on Wall Street, while NXP shares fell 7.5 percent - a level the company has not seen since Qualcomm made a bid for the company in October 2016.
NXP Chief Executive Richard Clemmer, announcing a $5 billion share buyback, said the experience would put his company off looking at any big transaction in the near future.
He called China's treatment of the company "unfair", and said he had expected the lifting of a ban on U.S. chipmakers doing business with ZTE would clear the way for the NXP deal.
"It was considered to be one of the factors in discussions with the Chinese relative to the regulatory process, so its quite surprising that the Chinese made the decision and did not approve the transaction," he said in the company's first conference call with analysts in nearly two years.
NXP said it had received a promised $2 billion break fee from Qualcomm on Thursday morning and Clemmer said it also expected to recoup $31 million in costs it lost as a result of the brief ban on trading with ZTE earlier this year.
Analysts said it would take time for the company to pivot away from a strategy built on the assumption it would act as Qualcomm's entry vehicle to a fast-growing market in chips for self-driving cars and other automotive uses.
"When a company has been in hibernation for 20 months there is a loss of business momentum that happens," said Tore Svanberg, an analyst with brokerage Stifel.
"The Street is going to remain neutral on the company for the next few quarters and give the management team an opportunity to come out again and reposition their strategy."
TOUGH FIELD
Qualcomm's board on Wednesday raised its own repurchase authorization to $30 billion and Chief Executive Steven Mollenkopf said he would still be looking at merger opportunities.
"We don't see this as any sort of risk to the overall business, it is just a very difficult environment to do large M&A, at least today," he told CNBC.
Analysts said they hoped the collapse of what would have been the largest chip industry merger would allow Qualcomm to deal with other problem areas of its business which promise more growth as well as resolving a series of legal conflicts over chip patents.
"While we are disappointed the NXP merger was abandoned for the long-term operating business, at least now there is some strategic clarity," Cowen analysts wrote in a client note.
Growing resistance from customers to Qualcomm's licensing practices has resulted in billions of dollars in regulatory fines, leaving the chipmaker searching for new ways to expand beyond its decade long dominance in chips for the mobile phone market, where growth has slowed.