The Reason You Should Be Buying QUALCOMM (Apart From Jana Partners Wish Coming True)

The Wall Street Journal reported on Monday that QUALCOMM, Inc. QCOM, which is scheduled to declare its earnings on Wednesday, might be considering breaking up its businesses something that activist hedge fund Jana Partners LLC has been pushing for long.

Jim Lebenthal of Lebenthal Asset Management was on CNBC recently to discuss the reasons for owning QUALCOMM's stock and whether increasing dividends and spinning off its businesses will be beneficial for the company.

The Main Thing To Look For

"The news regarding potentially splitting up the company, which is what Jana wants is good," Lebenthal began. "But, I think, really the reason you are supposed to own this stock is because you believe that the underlying business is improving. And we will see whether that's the case or not on the earnings report coming up."

"What we are really looking for here is some signs that they are gaining some traction back with Samsung. That may not come in this quarter's report, but we do expect to see that in the second-half of this year. That's really the fundamental thing that we are looking for in QUALCOMM."

Increased Buyback Yes, Split Maybe

Lebenthal was asked if as a QUALCOMM investors he wants the company to do the things Jana Partners is asking i.e. increase buybacks and split the businesses. He replied, "I want the increased buyback. [But] you have to remember that QUALCOMM does have a very large buyback program going on right now and given that we feel the shares are undervalued, we are fine with that."

"In terms of the breakup and we might use this as a Segaway, that's pretty similar to what IBM has done in the past year as far as getting rid of its chip manufacturing operation. And that in the long run is going to play out, but in the short-run it certainly hasn't helped IBM at all," Lebenthal concluded.