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November 13, 2017 Comments (0) Views: 75 Big Business, Blog, Hatch Blog

Qualcomm’s $100-plus-billion Offer

Semiconductor device supplier Broadcom is offering big bucks for Qualcomm, but will the local tech giant accept?

News surfaced recently of a potential buyout of local cellphone chip maker Qualcomm Incorporated. Qualcomm employs around 15,000 people in the San Diego region, so the impact of semiconductor device supplier Broadcom Limited’s proposed $100-plus-billion deal, the largest ever in the tech industry, could be far-reaching. It has been widely reported that if the deal is approved, the Broadcom/Qualcomm amalgam would become the third largest chip maker in the world, behind only Intel and Samsung Electronics. But will it actually happen?

Qualcomm officials declined to comment until the company’s board completes a review. “The Qualcomm Board of Directors, in consultation with its financial and legal advisors, will assess the proposal in order to pursue the course of action that is in the best interests of Qualcomm shareholders,” according to a company statement.

Qualcomm’s shares have lagged amid its legal battle with Apple over patent royalties, fines from anti-trust regulators and slow progress toward acquiring NXP Semiconductors, The San Diego Union-Tribune reported. Broadcom officials said their offer is a 28 percent premium over the closing price of Qualcomm common stock on Nov. 2.

The Economist reported that Qualcomm’s board is preparing to reject Broadcom’s unsolicited $130 billion offer because it’s too low. Forbes took it a step further, calling the unlikely deal a “long-term loser.” “Unlike Broadcom, Qualcomm approaches their value creation through a much longer-term lens. This is an unpopular approach on Wall Street, but one that is critical to the innovation ecosystem. Qualcomm has developed its wealth and market position through taking longer-term bets on developing next-generation technologies like 3G, 4G LTE, and 5G,” Forbes reported.

On the other hand, if Qualcomm loses its legal battle with Apple its shareholders could be more receptive to Broadcom’s offer, no matter the price, CNBC reported. Bloomberg has even mentioned the possibility of a hostile takeover.

Or Qualcomm could hold out for a higher offer. The New York Times reported that with Qualcomm focusing on 5G technology, which could potentially connect billions of devices to the “Internet of Things,” Qualcomm could drive up the price Broadcom eventually pays. Nikhil Varaiya, a finance professor at San Diego State University, told the San Diego Business Journal he wouldn’t be surprised if Qualcomm holds out for around $100 per share.

 It’s unclear what a takeover would mean for San Diego, but in an interview with the Union-Tribune, Broadcom CEO Hock Tan said Qualcomm’s local employees were “core to this company.” “We are very committed to San Diego. We are very committed to the cellular wireless business. And we have a history of bringing on all this talent under the Broadcom umbrella,” he said.

 

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