Qualcomm Inc.QCOM has decided to vend its Augmented Reality (AR) business, Vuforia, to PTC Inc. PTC – a global Internet of Things (IoT) platform provider, for $65 million. The deal is expected to close by the end of 2015. Vuforia is a global leader in AR platform, having a base of more than 175,000 developers powering over 20,000 apps.
The Technology
Augmented Reality is a platform which allows consumers to interact with virtual objects in the real world. Although still in its nascent stage, AR is being touted as the ‘next big thing’ in the consumer technology space. The concept was made popular more recently by the introduction of Google Glass from Alphabet Inc. GOOGL and Microsoft Hololens from Microsoft Corp. MSFT. The technology competes with Virtual Reality (VR), wherein the consumers interact in the virtual world rather than in the real world.
While PTC will try to combine its existing IoT platform with Augmented Reality, Qualcomm has stated that it will continue to develop computer vision technology that can help expand wide varieties of applications for consumers and businesses in future.
Structural Changes
It is natural to question the sale of Qualcomm’s AR business division given that the technology is deemed a potential cash cow in the near future. However, one must note that the company was trying to shed off $1.4 billion in costs in the course of implementing various structural changes. This included axing 15% of its workforce and discontinuing some far-off projects. A similar stance had been adopted earlier after the company divested its Retail Solutions business in 2014.
The Road Ahead
In the last reported third-quarter fiscal 2015, Qualcomm’s revenues and earnings were significantly down from the same period last year, demonstrating weakness in its chipset business. A slew of structural measures have been implemented by the company and the sale of its AR division was one of them. Meanwhile, it still continues to invest in businesses which it believes can create value in the near term. The company recently invested in R&D for making server chipsets based on ARM architecture to tap opportunities in the server market. However, it remains to be seen whether cost cutting and divesting measures can actually solve the company’s underlying problems and whether new investments can provide fruitful returns to its shareholders.
Qualcomm Inc. currently carries a Zacks Rank #3 (Hold).
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