The war of words continues between Broadcom and Qualcomm and the stock analysts still seem to be split on the merger. Please note that Broadcom is proposing to merge with Qualcomm instead of a tender offer which is what Qualcomm has proposed for the acquisition on NXP. Same result but two very different approaches. Another interesting point is that the merger agreement as it is written today will all but kill the NXP acquisition.
January 3[SUP]rd[/SUP], 2018 Broadcom PR:Qualcomm has once again made intentionally vague statements regarding “regulatory challenges” that are simply unfounded, misleading, and a disservice to Qualcomm stockholders. Qualcomm’s rhetoric is vague for a reason – because it is not grounded in reality. While it appears that Qualcomm will say anything to remain a standalone company, here are the facts:
Last week Broadcom issued a press release which included the proposed merger agreement. I’m sure this was already shopped around to the large QCOM stockholders but for us common folks it had more detailed information to sway public opinion. Remember, this will be Hock’s 7[SUP]th[/SUP] acquisition in five years under the AVAGO brand so let’s all assume he might just know what he is doing.
Here are the press releases and presentations from Broadcom:
- Press Release with Letter and Merger Agreement Read More
- Broadcom Presents Best and Final Offer for Qualcomm Read More
- Broadcom Comments on Qualcomm’s Statements Read More
- Broadcom Presentation – Feb. 5, 2018 Read More
- A Conversation with Antitrust Counsel to Broadcom Read More
We can chat more about this in the comment section. The Merger Agreement is 80+ pages long and well above my pay grade so I had a good friend, who specializes in such things, take a close look and explain it to me using small words. His personal opinion, and I agree 100%, is that Hock is a very clever man who is trying to brute force this acquisition and will most probably succeed. If you don’t agree, my friend says short QCOM because without this acquisition the stock is going to get a serious haircut (15-20% drop), his words not mine.
The one thing that my friend did not know is how the semiconductor industry got to where it is today and where it is going tomorrow. The story I offered him (which is documented in our book “Fabless: The Transformation of the Semiconductor Industry”) started with the transformation of the semiconductor industry from IDMs “Real men have fabs” to the fabless model made possible by pure-play foundries (TSMC) and fabless chip companies (QCOM, NVDA, AVGO, etc…) that now dominate the $400B+ semiconductor industry.
The next transformation, the one that is currently taking place, is the transformation from fabless chip companies to fabless system companies such as Apple, Huawei, Samsung, Tesla, Amazon, and many MANY others. Consolidation amongst the fabless semiconductor companies has been fierce the past three years and that will continue as the fabless systems company transformation gains momentum.
We have a front row seat to this transformation on SemiWiki.com since we see which domains are reading which articles and can sort the analytics in dozens of different ways (company, market segment, topic, etc…). Fabless systems companies have dominated SemiWiki readership for the past three years and that trend is growing, absolutely.
My good friend then asked: Why would a systems company spend the money to build a chip they can buy? I presented him with a handful of reasons but the one that resonated with him the clearest is the FPGA Prototyping / Emulation case study. By using FPGA prototyping and emulation platforms, systems companies can start software development well before a chip is taped-out much less delivered which is a serious competitive advantage in regards to time-to-market as well as the ability to customize the chip for the software and vice versa.
Broadcom and Qualcomm will meet on Valentine’s Day to discuss the proposed merger agreement so we will no doubt hear more shortly thereafter from anonymous sources close to the discussions…. ❤️
Bottom line: QCOM stock is headed for the tar pits without a sharp penciled businessman like Hock Tan at the helm, my opinion.