Broadcom Ltd has been trying to take over Qualcomm Inc without any real answer from the Qualcomm, but all might change at Qualcomm’s next shareholders meeting. (Images via their respective companies.)


Two rival companies are fighting over the market for wireless products. On one hand, Broadcom Ltd, a company well versed in the art of making wireless products, seems to be thriving since the creation of the company. On the other hand, Qualcomm Inc is recognized for its contribution to the expansion of mobile technology.

 

Even though the similarities in their products could justify Broadcom’s interest in Qualcomm, there is another aspect to the deal that could benefit both companies. First, Broadcom has demonstrated expertise in cutting operating costs; so, the deal might help Qualcomm benefit from that skill. Second, Qualcomm might offer Broadcom a great future with great revenue margins on the patent licensing services while Qualcomm could enjoy a makeover in its chip manufacturing department. It appears that both companies are benefiting from this union. Why is Qualcomm resisting the deal?

 

At first, Broadcom offered Qualcomm $70 a share, but Qualcomm’s executives estimated that their company was worth more and rejected the offer. Broadcom came back with a higher offer: $82 a share including $60 in cash and the remaining in Broadcom’s shares, which would make this deal one of the most expensive takeovers in history. Broadcom seems to have made its last move with this new offer. Yet, Qualcomm is still not biting. According to experts, it is incomprehensible that Qualcomm is resisting Broadcom’s offer, especially when the deal involves a possible fee of $8 billion Broadcom will have to pay Qualcomm in case they are unable to follow through on the deal. Talking about insurance.

 

Qualcomm’s hesitation is solely based on their appreciation of the company’s market value really is. However, they are open to meet and discuss with Broadcom after their shareholder's meetings on March 6. The meeting will focus on whether shareholders desire to involve Broadcom executives in Qualcomm’s board. The tension during this deal can also be justified by Qualcomm’s initiative to acquire NXP, a Dutch company which not only will increase Qualcomm’s market value but will also give the San Diego- based company an entrance into the semiconductors field. Qualcomm’s executive's team believe that once the deal with NXP is finalized, there won’t be any need for Broadcom to takeover since Qualcomm will have a bigger market share in the industry of mobile wireless. Unfortunately, having a bigger presence on the market will not delete Qualcomm’s legal issues with Apple Inc. claiming Qualcomm is misusing its dominance in the field of smartphone chips; and many regulators around the world support the iPhone maker, which does not ease life for Qualcomm.

 

Overall, it appears that Qualcomm is stalling for time to avoid being absorbed by Broadcom. Both companies stand to win in case of a takeover, but Broadcom is the biggest winner with a probable increase of its shares price. Nonetheless, Qualcomm’s feisty spirit proves that the executives believe in the company. The tension surrounding this deal may also be a sign for smaller companies that they can always fight big conglomerates back in the event of an attempted takeover.

 

Have a story tip? Message me at: cabe(at)element14(dot)com

http://twitter.com/Cabe_Atwell