Photograph by Konrad Fiedler — Bloomberg/Getty Images
By Stacey Higginbotham
December 15, 2015

Qualcomm has determined that splitting the company into a licensing business and chip design operation is not the right strategic move, according to a report issued Tuesday. The San Diego-based company, which makes chips found in many of today’s cell phones, had conducted the review at the behest of activist shareholder Jana Partners, which had disclosed more than $2 billion in Qualcomm holdings back in April.

The review involved the board, several law firms, consulting firms, and investment banks. The committee considered a split, a partial split, tracking stocks and a variety of other structures, according to Paul Jacobs, executive chairman and chairman of Qualcomm’s board.

So far Jana has prompted Qualcomm (QCOM) to make changes to its board, instituted a restructuring of its operations and instituted a $11.3 billion stock buyback. But what he really wanted was to split up the business.

The idea was that Qualcomm’s patent royalty business was worth more when separated from its chip design business. Qualcomm owns a variety of valuable patents associated with mobile technology including the rights to the CDMA wireless technology that’s still used by many cell phones sold inside the U.S. It also has a variety of LTE patents. For others in the industry, paying Qualcomm royalties on patents that Qualcomm also used in its own chip designs (which the competitors also had to pay to license) was a tough sell.

However, in a release discussing the report, Steve Mollenkopf, CEO of Qualcomm said:

“The strategic benefits and synergies of our model are not replicable through alternative structures. We therefore believe the current structure is the best way to execute on our strategy to build on our position in the ecosystem and deliver enhanced performance and returns. Looking ahead, we have a focused plan in place that we believe will drive growth and we are off to a good start implementing that plan.”

That plan includes limiting the focus of Qualcomm’s sales and R&D efforts to fewer areas. Those areas include mobile, small cells, automotive, data centers and the Internet of things. Some of the reasons Qualcomm believes the two business units work better together include research and development expertise and the ability to use its chip distribution power to influence standard-setting organizations once it has developed patentable technology. Qualcomm doesn’t phrase it that way.

It writes, “[T]he combination of Qualcomm’s leading technology innovations and global semiconductor product reach enables the Company to work more effectively within standard bodies and with major ecosystem partners to develop and drive new technology and deliver chipset products to customers operating at global scale.”

Either way, the theme of the report is that both parts of the business are like peanut butter and chocolate; Qualcomm’s licensing business and its chip business work better together.

For more on Qualcomm check out this video with CEO Steve Mollenkopf on growing a company in the mobile era:

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