Shares of Qualcomm have spiked after reports from the Wall Street Journal and Bloomberg News that rival chipmaker Broadcom may be preparing a bid. Shares are down almost 16% this year due to legal battles with Apple and the loss of royalties from Apple and an unnamed second licensee.
Shares of Qualcomm (Nasdaq: QCOM) were up about 14% to a $93 billion market cap following the announcement; Broadcom (Nasdaq: AVGO) was up about 5% to a $110 billion market cap. Evil shriek in happiness, chipmaker Broadcom is reportedly considering buying fellow chipmaker Qualcomm for $100 billion with a capital B. Broadcom itself was reborn in 2016 when Avago Technologies Ltd. acquired Broadcom Corp. for $37 billion. It is now incorporated in Singapore and co-headquartered there and in San Jose, California. Shares of Qualcomm jumped 12.7 percent to $61.81, while Broadcom's stock climbed almost 6 percent to $273.63 on Friday afternoon. Since then, though, smartphone sales growth has slowed and Intel has succeeded in placing its modems in some iPhone models. 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. Earlier this week, Qualcomm executives said the legal process would "proceed under the court's schedule", indicating no resolution soon.
At issue between Qualcomm and Apple are licensing fees the chipmaker charges for patents that cover the basics of how mobile phone systems work.
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Reports said that between 400 and 700 employees in the 33,000-person company were laid off after performance reviews. Which, naturally, said journalists went and blogged about.
As for Broadcom, its CEO Hock Tan has a huge appetite when it comes to acquisitions and states that he is interested in more deals, which could be halted thanks to the intervention of USA regulators since Qualcomm is a US -based technology company. The deal is facing regulatory examination in Europe and opposition from some shareholders including activist hedge fund firm Elliott Management Corp., which has argued the offer undervalues NXP.
The two companies are already involved in big deals from about a year ago.