Broadcom Ltd.is exploring a deal to acquire Qualcomm Inc., according to people familiar with the matter, in what could be the biggest ever takeover of a chip maker. 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. Qualcomm's stock is down 16 percent this year, excluding the jump prompted by the Broadcom news today, and it suffered a staggering 90 percent drop in profit in its fourth quarter earnings released earlier this week. At $70 a share, an offer would value Qualcomm at $103 billion.
Broadcom, based in Irvine, was acquired in 2016 by Avago Technologies, a Singapore based semiconductor outfit that has been growing through acquisitions - including LSI Corp., PLX Technology, Emulex and others.
Broadcom, created in 2016 when Avago Technologies Ltd. acquired then-Broadcom Corp. for $37-billion, said this week it will return its headquarters to the US from Singapore.
Qualcomm finds itself in a weakened state.
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Qualcomm's shares have been trading in the low $50s for much of this year - down about 15 percent because of its fierce legal battle with Apple and hefty fines/lawsuits from anti-monopoly regulators in the U.S., South Korea and Taiwan. Since then, though, smartphone sales growth has slowed and Intel has succeeded in placing its modems in some iPhone models.
Qualcomm and Apple have been embroiled in a dispute over royalties that has landed the two corporations in court. Qualcomm has countered that Apple, one of its largest customers, has lied to regulators in an unfair attempt to bully its opponent into charging less.
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.
That would give it control of a big part of the supply chain of vital phone components such as wi-fi and cellular modem chips.