Trump blocks Broadcom's takeover of Qualcomm

Mindy Sparks
March 14, 2018

Although its name isn't widely known outside the technology industry, Qualcomm is one of the world's leading makers of the processors that power many smartphones and other mobile devices.

Broadcom, which has said it would invest in Qualcomm's 5G technology if a deal went through, said late Monday it was reviewing the order.

With this in mind, analysts have said a deal between Qualcomm and Broadcom could have given Huawei the chance to take over the top spot in years to come - a situation U.S. politicians wanted to prevent given their ongoing security concerns around Chinese telecom firms doing business with U.S. carriers.

CFIUS was also concerned by Broadcom's efforts to expedite its redomiciliation to the US following the panel's decision March 4 to investigate its bid for Qualcomm.

"He looks for value".

The move by Mr Trump to kill the deal comes only months after the USA president himself stood next to Broadcom chief executive Tan Hock Eng at the White House, announcing the company's decision to move its headquarters to the U.S. and calling it "one of the really great, great companies".

You guys know this already, but Broadcom and Qualcomm have been going back and forth over several months now after Broadcom attempted to acquire the U.S. chipmaker.

"The proposed takeover of Qualcomm by the purchaser (Broadcom) is prohibited, and any substantially equivalent merger, acquisition, or takeover, whether effected directly or indirectly, is also prohibited", the presidential order released on Monday said.

San Diego-based Qualcomm evolved from a US military aerospace contractor to become the dominant player in wireless radio technology over the past two decades, with its chips used in half of all smartphones.

Qualcomm's dominance of baseband chips that connect phones to networks would have represented the crown jewel in Broadcom's portfolio of communications chips that supply wi-fi, graphics, video and networking features alongside baseband chips.

Broadcom now has ample firepower for smaller deals, with about $11 billion in cash and the potential to generate almost $9 billion in annual free cash flow, analysts estimate. Xilinx has a market value of US$20 billion and Mellanox is just under US$4 billion. Xilinx declined to comment.

The cash-and-stock bid, which Qualcomm had rejected, was under investigation by the U.S. Committee on Foreign Investment in the United States, a multi-agency panel led by the Treasury Department that reviews the national-security implications of acquisitions of U.S. corporations by foreign companies.

"But that really hinges on completely severing the foreign ownership connection, and they would probably have to endure a pretty deep dive on the first deal".

Other reports by Iphone Fresh

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