PARIS - Sequans Communications S.A. (NYSE: SQNS), a key player in 4G and 5G semiconductor solutions for the Internet of Things (IoT), has finalized the sale of its 4G IoT technology assets to Qualcomm (NASDAQ:QCOM) Technologies, Inc., a subsidiary of Qualcomm Incorporated. The transaction, which closed recently, positions Sequans to concentrate on the Massive IoT market with its 4G products and future 5G developments.
The company announced that it received $182 million in cash from the deal, with an initial $172 million paid on September 30 and up to an additional $10 million to follow after a one-year warranty period. An earlier pre-transaction manufacturing license agreement and bridge loan account for the remaining $18 million of the total $200 million purchase price.
Sequans retains a perpetual license to use, commercialize, and enhance its 4G IoT technology, ensuring ongoing benefits from its existing innovations. This strategic move allows Sequans to reaffirm its commitment to its 4G LTE-M/NB-IoT and Cat 1bis product lines and to advance its 5G roadmap, including RedCap and eRedCap technologies, which are designed to facilitate a smooth transition from 4G to 5G IoT solutions.
Industry leaders have acknowledged the significance of this transaction. Itron (NASDAQ:ITRI)'s CEO, Tom Deitrich, recognized the strengthened capability of Sequans to deliver technology at scale. Geotab's COO, Derek Luke, and AT&T's Vice President of Connected Solutions, Cameron Coursey, expressed their support for Sequans' technology leadership and upcoming 5G IoT innovations. ABI Research's Vice President, Dan Shey, noted that Sequans' 4G intellectual property is set to become a cornerstone of the mass market IoT industry.
Sequans CEO Georges Karam emphasized the company's enhanced balance sheet and the comprehensive portfolio that positions Sequans to lead in the market. This development comes as the company aims to deliver best-in-class products and services with a focus on low-power LTE-M/NB-IoT, LTE Cat 1bis, and upcoming 5G technologies.
This information is based on a press release statement and reflects the company's forward-looking statements regarding its financial condition, operations, and business strategy following the completion of the transaction. These statements are not guarantees of future performance and are subject to risks and uncertainties.
In other recent news, Sequans Communications has witnessed a significant shift in its financial position following a $200 million asset acquisition deal with Qualcomm. This deal involved Sequans' 4G IoT technologies and has transitioned the company from a net debt of $80 million to holding net cash of the same amount. Analyst firm Roth/MKM maintained its Buy rating and $3.00 price target for Sequans, endorsing the company's technology portfolio and predicting further growth with the introduction of RedCap technology.
Sequans also reported Q1 2024 revenues of $6.0 million and reduced its operating loss to $8.5 million from the previous quarter's $12.8 million. The company also adjusted its American Depositary Shares (ADS) structure, enacting a 1-for-2.5 reverse stock split for the ADSs, a move expected to increase the trading price of the ADSs and ensure compliance with the New York Stock Exchange's minimum price requirement.
In addition to these developments, Sequans has secured standstill agreements with Lynrock Lake, Nokomis, and Renesas, and announced a $15 million licensing agreement for the Monarch2 LTE platform with an undisclosed technology company. However, the company has suspended the development of its 5G Taurus product to focus on low-power 5G for massive IoT applications. These recent developments reflect Sequans' strategic growth and financial stability.
InvestingPro Insights
Following Sequans Communications S.A.'s (NYSE: SQNS) strategic sale of its 4G IoT technology assets to Qualcomm, InvestingPro data offers additional context to the company's financial landscape. Despite the significant cash infusion from the transaction, SQNS's market capitalization stands at a modest $73.99 million, reflecting the market's current valuation of the company's remaining assets and future potential.
The company's financial metrics paint a complex picture. While Sequans reported a gross profit of $19.25 million in the last twelve months as of Q2 2023, with an impressive gross profit margin of 68.1%, the company faces challenges. The revenue for the same period was $28.26 million, marking a substantial year-over-year decline of 47.17%. This aligns with an InvestingPro Tip indicating that analysts anticipate a sales decline in the current year.
Interestingly, despite the overall revenue decline, Sequans showed a quarterly revenue growth of 5.65% in Q2 2023, suggesting a potential turnaround in progress. This recent positive trend is further supported by the stock's strong performance over shorter time frames. InvestingPro Tips highlight significant returns over the last week, month, and three months, with an impressive 130.13% price total return over the past three months.
However, investors should note that SQNS is not currently profitable, with an operating income of -$32.7 million and a negative EBITDA of -$26.82 million for the last twelve months. This aligns with another InvestingPro Tip stating that analysts do not anticipate the company to be profitable this year.
The recent asset sale to Qualcomm could be a pivotal moment for Sequans, potentially addressing some of these financial challenges. The cash injection may provide the company with the resources needed to focus on its stated goals of advancing its 5G roadmap and strengthening its position in the Massive IoT market.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for SQNS, providing a deeper understanding of the company's financial health and market position.
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