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Qorvo (QRVO +13%) is surging today after activist investor Starboard Value disclosed a 7.7% stake in the chipmaker. The news has lit a fire under QRVO, pushing its shares to their best levels since before a considerable sell-off in late October triggered by dismal Q3 (Dec) and FY25 (Mar) guidance.

The concerning outlook was prompted by an unfavorable mix within its smartphone business and a shift among Android (GOOG) smartphone users toward entry-tier devices at the expense of mid-tier. QRVO is a major supplier of mobile components, with Apple (AAPL) as its largest customer, comprising nearly half of its FY24 revenue. Without customers upgrading often and gravitating toward Pro models, where QRVO commands a leadership position, quarterly performance takes a hit. As a result of the ongoing trade-down to lower-tier models, the company enacted manufacturing and operating expense reductions last quarter.

However, today's confirmation of Starboard's active stake is acting as a significant vote of confidence in QRVO's sturdy positioning in the handset market and its ability to leverage this position and return to growth.

• Since QRVO's alarming outlook, some light has started to peak through the clouds. The company commented last month that it secured enough wins to date to fuel its confidence in content growth expanding yr/yr going forward. QRVO also noted that consumers should ultimately gravitate toward premium handsets over time.
• QRVO's cost-cutting actions continue to take shape. While the company anticipated gross margins to dip slightly yr/yr in FY25, possible tailwinds are materializing heading into FY26. For instance, earlier this week, QRVO closed on the previously announced divestiture of its silicon carbide business, a margin accretive move that will carry into FY26. Other cost-reduction initiatives underpin QRVO's confidence in achieving its 50% gross margin target over time, a massive improvement over the 42.6% margins delivered in Q2 (Sep).
• Starboard Value's history centers around enacting meaningful changes to spur growth. While QRVO's ambitions are notable, the hedge fund may want to accelerate the company's plans, potentially finding alternative routes to generate sales growth while the handset market deals with stubborn economic headwinds.

Starboard Value's active stake in QRVO is encouraging as the fund views the company's depressed stock price as a valuable investment opportunity. While QRVO's share price was trading near five-year lows prior to Starboard's stake, there are concerns to be wary of over the near term that could keep selling pressure active. Most notably, Apple has been running into some troubling obstacles lately, as growth in China languishes while the company's AI features do not appear to resonate strongly with consumers, potentially hindering upgrades and quarterly growth.