Friday, November 3, 2017

Broadcom reportedly thinking about buying Qualcomm for $100 billion

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In a move that would make Austin Powers’ Dr. Evil shriek in happiness, chipmaker Broadcom is reportedly considering buying fellow chipmaker Qualcomm for $100 billion with a capital B.


According to Bloomberg, Broadcom is currently in talks with advisers on how to best approach the potential bid, which is likely to be made official in the next few days. 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.


For Broadcom and Qualcomm, the $100 billion bid would make a good deal of sense. A deal of this kind aligns with the current industry trend of consolidation, but also keep in mind that Broadcom is the largest maker of Wi-Fi chips in the world, while Qualcomm is the largest maker of modems. As such, if Broadcom were to own Qualcomm, the resulting entity would be in a better position to negotiate with the likes of Apple and Samsung.




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There would also be some synergy with the bid, since both companies make chips that connect devices to each other and to the Internet. That synergy would surely benefit Broadcom, particularly with the Internet of Things not yet reaching its huge potential.


The $100 billion bid would be far from a sure thing if made official, however. For one, Qualcomm is in the midst of a legal dispute with Apple, with the dispute having started in January when Apple sued Qualcomm for $1 billion. The chipmaker countersued the Cupertino-based company in April, sought injunctions to halt iPhone sales in the US and China, and filed a lawsuit over copyright infringement.


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


With these lawsuits, however, Qualcomm is in an unenviable position that could significantly alter the chipmaker’s business model and finances moving forward. If Samsung’s legal dispute with Apple has shown us, these processes tend to take time to unfold, but there is no denying the financial risk of a buyout.




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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. As such, the chipmaker could be heavily monitored by industry regulators.


Also, the $100 billion buyout would be the largest purchase of a chipmaker, so Broadcom and Qualcomm will need to make strong cases for such a purchase.


We’ll be paying close attention in the next few days for a potential announcement, so stay tuned for additional updates. In the meantime:




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