Published: Thu, November 09, 2017
Markets | By Rosalie Gross

Sources claim Qualcomm is set to reject $130 billion takeover offer

Sources claim Qualcomm is set to reject $130 billion takeover offer

Broadcom has offered to pay $70 for each of Qualcomm's shares.

Chipmaker Broadcom on Monday announced an unsolicited bid to buy rival Qualcomm for $103 million (€89 million) as it looked to boost its presence in the wireless market.

Given China's ambitions in the chip and mobile telecoms space, I can't see the Chinese authorities taking kindly to a Broadcom-Qualcomm merger. If the deal goes through, another result could be significantly higher smartphone prices, according to the investor site TheStreet, which noted, "Get ready for the $2000 smartphone in a world where chipmaking is dominated mostly by one company".

Qualcomm's core business is designing the chip-based radios used by smartphones to connect to cellular networks, while a big part of Broadcom's business is designing chip-based Wi-Fi and Bluetooth radios.

The fact that Qualcomm shareholders have witnessed the company's stock price being eroded by the ongoing patent dispute between QCOM and Apple Inc. The company is now reviewing the unsolicited bid and has not reacted to the offer apart from acknowledging its existence.

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Broadcom believes that through acquiring Qualcomm it can broaden its portfolio and better compete with its other competitors, as well as deliver additional value for its stockholders.

Founded in 1991 and headquartered in Singapore and California, Broadcom has made more than a dozen acquisitions over the past 10 years, the most recent was its $5.5 billion takeover last year of Brocade Communications Systems.

The combined company would become the third-largest chipset manufactured behind Intel Corporation (NASDAQ:INTC), which leads the market, Samsung Electronics, which is second in terms of market share.

Antitrust officials, who also would have to approve a Broadcom-Qualcomm deal, still are considering Qualcomm's purchase of NXP. Therefore, Broadcom would be acquiring two companies if its bid is successful and the NXPI acquisition is approved.

It is not clear whether Qualcomm will engage with Broadcom in talks about the proposal or fight against the suggested takeover.

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