Chipmaker Broadcom exploring deal for Qualcomm: Bloomberg | Reuters
First of all, this makes a ton of sense for Broadcom, it would be great for shareholders of both companies. However, I would think there would be serious anti trust concerns here. The companies compete heavily in a number of markets, and the combination would create an absolute juggernaut in the SoC market, especially if the NXPI deal also goes through. Thoughts?
There's no way under the sun that Qualcomm management and the institutional shareholders would ever accept a "take under" at $70. It would take around $85-$90 to get even any interest, on the financial side only.
AVGO is far less profitable than QCOM, even with the artificial suppression of QTL metrics caused by the "litigation put" on the stock, and zero being temporarily paid in royalties by the contract manufacturers as to Apple products (only).
While Wall Street has in this frothy market rewarded AVGO with a high market cap and ludicrous GAAP P/E, in fact Hock Tan's business is a highly leveraged, debt laden house of cards.
With NXPI acquired, QCOM stock will rise into the 60's on its own, notwithstanding the Apple attack. On that front, it will be interesting to see whether QCT refuses to sell Apple anything but legacy silicon next year, and instead obtain injunctions prohibiting Apple from using silicon from Intel with what may well be misappropriated software and source code. I predict it will be QCT breaking up with Apple, not visa versa. We'll find out how long it takes Intel and Apple to create a new wheel, that doesn't utilize QCT's source code and proprietary IP. By leaking to the press on Monday that Qualcomm would be designed out of next year's iProducts, and claiming QCT wrongfully refused to provide software testing tools for same. Apple (and Intel) opened Pandora's box, and have put the entire Apple outsized mobile fortune at risk. I'd love to be involved in the Discovery phase of this newly filed Superior Court breach of software agreement case.
Back to AVGO's bid to buy QCOM on the cheap, it simply will not happen.