Science

Qualcomm to Discard Broadcom's Bid

Qualcomm to Discard Broadcom's Bid

Given Broadcom's initial bid for Qualcomm combined with Qualcomm's Board of Directors rejecting the bid, we believe our base case scenario of $6.90 in C2019 pro-forma earnings (with NXP, with royalties from Huawei, and assuming Apple settles at a 50% discount to previous iPhone royalties) is a realistic outcome.

Going further, Qualcomm CEO Paul Jacobs says that the $130 billion offer "significantly undervalues" the company.

Qualcomm said Monday that it's in a unique position to grow on its own.

Qualcomm CEO Steve Mollenkopf added that the United States chip maker has a future in mobile, the Internet of Things (IoT), edge computing and networking within the semiconductor industry, and the firm has no doubt of future growth in these areas.

This comes shortly after Qualcomm filed another lawsuit against its main chip purchaser, Apple, claiming that it broke a confidentiality clause found in its contract.

Broadcom has also been deliberating the possibility of raising its bid for Qualcomm, including through more debt financing, some of the sources said, although it was not clear when Broadcom would choose to make such a move.

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In addition, according to Presiding Director of Qualcomm Tom Horton, there was also "significant regulatory uncertainty" which put Qualcomm on edge - which could have led to outright regulatory rejection, complicated discussions, and a long road to meet legal requirements and maintain value.

Both semiconductor companies did not immediately respond to requests for comment.

On a more positive note, Canaccord Genuity's Mike Walkley, reiterating a Buy rating on Qualcomm, raises his price target to $83 from $76, writing that he thinks Broadcom will bid higher. It said its dominance of the mobile processors market and future growth prospects mean it is unable to accept Broadcom's valuation.

Qualcomm delivers chips to carrier networks to provide broadband and mobile data.

Just last week, Broadcom issued a note to investors in which they announced a "proposal to acquire all of the outstanding shares of" Qualcomm "for per share consideration of $70.00 in cash and stock".


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