Published: Sat, November 04, 2017
Entertaiment | By Minnie Bishop

Qualcomm shares surge 13% on talk of $100 billion takeover by Broadcom

Qualcomm shares surge 13% on talk of $100 billion takeover by Broadcom

Shares of Qualcomm have spiked after reports from the Wall Street Journal and Bloomberg News that rival chipmaker Broadcom may be preparing a bid.

Broadcom is speaking to advisers and the offer of about $70 (53.57 pounds) a share would include cash and stock, Bloomberg reported earlier, citing people familiar with the matter. The unnamed sources also stressed that no final decision has been made, however, so there is still a chance for Broadcom to not proceed with a bid.

Assuming Broadcom still decides to move forward with its $100 billion bid of Qualcomm, such a bid would give Broadcom significant leverage over components like Wi-Fi and cellular modem chips.

Regulators are still reviewing Qualcomm's $38.1 billion proposed acquisition of NXP Semiconductors for $38.1 billion.

If it happens, it would be the largest takeover of a chip firm. The sector's M&A volume in the Americas reached $117.9 billion in the first nine months of 2017, a 58% decrease over the same period in 2016, Dealogic data show. Well, Qualcomm happens to be in the middle of an ongoing existential crisis perpetuated by a legal showdown with Apple, which has always been a Qualcomm buyer for wireless modems that enable the iPhone to communicate with telecom networks.

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Like Qualcomm, Broadcom is a major supplier of parts for Apple products. Before Friday, its shares had slumped 16 percent this year, compared with a 41 percent surge in the Philadelphia Semiconductor Index. Broadcom is also a major supplier to numerous same companies for Wi-Fi chips. Qualcomm's shares shot up almost 13 percent in midday trading today after the report, for a valuation of about $92 billion.

Qualcomm faces a multinational legal battle with Apple Inc over Qualcomm's licensing terms to Apple.

Most recently, Qualcomm filed yet another lawsuit against Apple, with the chipmaker accusing the iPhone maker of breaching a software license contract.

Aside from the financial challenges of such a large deal, Broadcom may also encounter close regulatory scrutiny.

Broadcom and Qualcomm have few areas of overlap and but both make Wi-Fi solutions for wireless routers, Bluetooth drivers and some RF semiconductors, said Rob Lineback, a research analyst at IC Insights.

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