Qualcomm shares spike on reports of planned Broadcom bid

Oscar Cross
November 4, 2017

Broadcom Ltd.is exploring a bid for San Diego-based Qualcomm Inc. according to news reports.

A Qualcomm representative declined comment. No final decisions have been made and there's no guarantee a deal will go ahead. The news outlet also noted that the stock of Qualcomm went up 14 percent following the news, which is the largest stock movement for the company in almost a decade. Broadcom's stock also rose on the report, adding $14.13 or 5.45% to $273.63.

Prominent Apple supplier and component maker Broadcom is considering an acquisition of fellow chipmaker Qualcomm for more than $100 billion, in what would be the largest-ever acquisition in the chip business. Though the merged companies took the Broadcom name, Avago's Chief Executive Hock Tan and his executive team run the company.

That gave Qualcomm a current total market value of $91 billion. Tan has said he wants more deals, a strategy that could be limited by opposition from US regulators. As a result, there is talk that the 2018 iPhone and iPad models will feature modem chips made by Intel and MediaTek. This week, Broadcom said it would move its headquarters from Singapore back to the us, where it lists an HQ in San Jose, California. 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.

Regulators are still reviewing Qualcomm's $38.1 billion proposed acquisition of NXP Semiconductors for $38.1 billion. The deal is facing regulatory scrutiny in Europe and opposition from some shareholders including activist hedge fund firm Elliott Management Corp., which has argued the offer undervalues NXP.

Based on 2016 revenue, the enlarged company would be the world's third-largest chipmaker behind Intel and Samsung Electronics. Broadcom is also a major supplier to numerous same companies for Wi-Fi chips.

A tie-up between the two chipmakers would be the latest in the semiconductor industry that has been rapidly consolidating as companies try to capture a big share of the fast-growing market for connected devices and connected cars.

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