Broadcom reportedly thinking about buying Qualcomm for $100 billion

04 November, 2017, 00:24 | Author: Warren Cooper
  • Albert Gea  Reuters

It would be the biggest-ever purchase of a semiconductor manufacturer.

Shares of Qualcomm have spiked after reports from the Wall Street Journal and Bloomberg News that rival chipmaker Broadcom may be preparing a bid.

As for Broadcom, its CEO Hock Tan has a huge appetite when it comes to acquisitions and states that he is interested in more deals, which could be halted thanks to the intervention of USA regulators since Qualcomm is a US -based technology company. Nothing has been hammered out yet and there's no guarantee that a deal will materialize. No concrete decisions on the matter have yet been reached and it's now unclear what conditions would the semiconductor company be prepared to offer to Qualcomm and what level of a bid would the San Diego, California-based tech giant be prepared to consider. Broadcom stock, meanwhile, is trading up almost 6.5 percent.

Broadcom's acquisition would be the most ambitious move by Tan, who has turned a small, scrappy chipmaker into a $100-billion company with a string of deals, since he took the helm a decade ago. At $70 a share, an offer would value Qualcomm at $103 billion.

A change of management at Qualcomm might help resolve the dispute with Apple more quickly, and thereby make Qualcomm's licensing and chip businesses more valuable, according to Sanford C. Bernstein & Co. analyst Stacy Rasgon. Broadcom now lists Singapore and San Jose as co-headquarters.

Apple earnings surge as it beats Wall Street forecasts
But investors will also be looking for color on the iPhone X, Apple's most expensive iPhone, during the company's earnings call. That equals earnings of $10.7 billion, or $2.07 per share, beating the anticipated $1.87.

The saga kicked off almost a year ago, in January 2017, when Apple first filed a lawsuit against Qualcomm for allegedly abusing its market position to extract more money from hardware manufacturers. Apple, in suing Qualcomm, thinks the company is nonetheless overcharging for use industry standard patents, which the law requires be licensed out on fair, reasonable, and non-discriminatory (or "FRAND") terms.

Qualcomm, based in San Diego, is also confronting headwinds in closing its $47 billion purchase of NXP Semiconductors.

Aside from the financial challenges of such a large deal, Broadcom may also encounter close regulatory scrutiny.

Qualcomm may soon be extended a way out courtesy of Broadcom, which itself supplies Apple with Wi-Fi and Bluetooth combo chips. The two companies are already among the top 10 providers of chips in an industry that's consolidating rapidly.

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