Hock Tan Goes Hunting As Broadcom Seeks Tie-Up With Qualcomm
Summary
- Broadcom exploring a deal to buy Qualcomm.
- Could eliminate Qualcomm/NXP deal.
- Would be largest semiconductor merger.
Broadcom (AVGO) dominated headlines this afternoon with rumors of a Qualcomm (QCOM) acquisition. Neither company has made any official statement, but Qualcomm’s shares soared following the report from Bloomberg - up 14% as of this afternoon, and still climbing. This could be the most significant deal in the realm of semiconductor companies.
Broadcom was on the other side of these headlines in 2015 when it was acquired by Avago, another semiconductor manufacturer. Now we have two multi-billion-dollar companies looking at a potential merger, with Broadcom at a $110 billion market cap and Qualcomm at $80 billion, respectively. Around this time last year, Qualcomm made a $39 billion bid to acquire the Dutch semiconductor company NXP (NXPI). Qualcomm CEO Steven Mollenkopf stated last month “we are on track to close this year.” The deal has been under scrutiny since hedge fund Elliot Management Corp. called the share valuation into question, though Qualcomm seems confident the deal will go through.
"If this Qualcomm-Broadcom deal goes through, I think the NXP deal is shot. That would be extremely complicated - not only internally but also with regulators.”
How would the Broadcom deal stir up the tech space? It’s all about leverage, especially when dealing with giants like Apple (AAPL). Ben Nye states:
“If you’re working with Apple, you have to have a lot of leverage. If you don’t have leverage – Apple is just going to eat your lunch.”
Offering Apple a bundle or package deal would help margins for a consolidated Broadcom/Qualcomm, because if they absorb more components that can serve the Apple ecosystem, they become more valuable.
In addition, the pair discusses potential next steps and acquirers for NXPI and the ripple effect the deal could have on the tech landscape as a whole.
This article was written by
Analyst’s Disclosure: I am/we are long QCOM, AVGO, AAPL, INTC, SWKS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.