Having announced a move of their headquarters to the US, Broadcom AVGO 498,54 +15,93 +3,30% is now targeting another chipmaker for a takeover. Even with the Brocade deal stuck in CIFUS negotiations, they are looking to target Qualcomm QCOM 123,53 -4,21 -3,30%.
Given that both Qualcomm and Broadcom have income streams from WiFi and LTE chipsets. The combination of both companies will potentially reduce options for mobile phone suppliers. While Qualcomm makes many of the CPUs in shipping mobile phones today, we are seeing that phone manufacturers like Apple and Samsung are developing their own chipsets.
Between them, Qualcomm and Broadcom own a substantial element of radio intellectual property, which makes breaking into the WiFi, Bluetooth and LTE spaces challenging against the two. And Intel, which is also trying to break into the modem market will be fearful of the combined organisation. Qualcomm is in the process of trying to acquire NXP, and Broadcom is apparently keen on obtaining NXP’s IP, particularly regarding autonomous vehicles. Elliott Management is a significant stakeholder in NXP and has been arguing for a higher price from Qualcomm.
The combined organisation would be over $200bn, creating one of the biggest acquisitions in the technology sector.
According to Reuters, Broadcom is working with banks to provide the cash elements for the combined stock and cash bid. Divestitures to satisfy anti-trust issues are likely on both sides.
Perhaps the reason the Presidential meeting didn’t announce a location is that Broadcom has their eyes on Qualcomm’s San Deigo, California headquarters.