Broadcom Is Said to Weigh Takeover Bid of Qualcomm

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Friday, November 3, 2017
NY Times
Broadcom Is Said to Weigh Takeover Bid of Qualcomm

Qualcomm, a longtime giant of the computer chip industry that has fallen on hard times of late, may find itself a takeover target for a fast-rising upstart.

Broadcom, which in just eight years has become a formidable competitor in the semiconductor industry, is weighing a takeover bid for Qualcomm, two people briefed on the matter said on Friday.

Should Broadcom decide to pursue a deal, it would be the biggest takeover bid in the semiconductor business to date. As of Friday afternoon, before Bloomberg News reported on Broadcom’s deliberations, Qualcomm had a market valuation of about $81 billion. A bid could come as soon as this weekend, said the two people, who spoke on the condition of anonymity because the deliberations were still private.

A spokeswoman for Qualcomm declined to comment, while a representative for Broadcom did not respond to requests for comment.

A merger between Broadcom and Qualcomm would combine a range of semiconductor, computing and networking technologies. But certainly one rationale, analysts say, would be to increase the combined companies’ real estate on smartphones — and perhaps a more secure position in that crucial industry.

Broadcom, they say, may be betting it could reach a peace with Apple, which is pulling away from Qualcomm as a supplier and fighting in court with it over patents.

“It would certainly increase Broadcom’s exposure to wireless, and maybe the company believes it can develop a better relationship with Apple,” said Stacy Rasgon, an analyst for Bernstein Research.

Qualcomm has been grappling with a sagging stock price — it was down 20 percent in the 12 months that ended Thursday — and its fight with Apple. This week, the company sued Apple, accusing the iPhone maker of violating a software license agreement to help out Intel, whose rival modem chips are used in newer iPhones.

And Qualcomm has not yet completed its $38.5 billion takeover of another chip maker, NXP Semiconductors, a transaction meant to help diversify its business away from smartphones. What would happen to that planned takeover if Broadcom acquired Qualcomm was not yet clear.

While Qualcomm has suffered several misfortunes in the last several years, its potential pursuer has enjoyed far better success of late.

Broadcom’s leadership traces itself back to Avago Technologies, a company that went public in 2009. At the time, it was just another small player in the semiconductor industry, worth $3.5 billion. But it has embarked on a breathtaking acquisition spree since then, driven by the soaring ambitions of its chief executive, Hock Tan, and backed by the big investment firm Silver Lake Partners.

Two years ago, Avago struck its biggest deal to date by buying Broadcom, whose chips are used in smartphones and networking devices, for $37 billion. Mr. Tan’s company adopted its target’s name — and did little to hide its desire to hunt even bigger game.