Investors put their chips on Broadcom mega

Herbert Rhodes
November 4, 2017

Shares of wireless chip technology giant Qualcomm (QCOM), at $81 billion in market cap, are up $3.86, or nearly 7%, at $58.70, and were up 9% at one point, following a headline from Bloomberg that even bigger giant Broadcom (AVGO) is "exploring a possible takeover" of Qualcomm.

According to Bloomberg news, if the deal goes through then Broadcom might acquire Qualcomm for the price of $100 billion, which would value the latter's shares at $70.

Broadcom representatives are reportedly speaking with advisers regarding a potential deal. A final decision on whether to proceed has not been made, they said.

Share value in Qualcomm is up almost 14 percent on the news. Broadcom's stock rose 4% to $271.09 a share.

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Broadcom, which has a market value of $110 billion, just announced on Thursday that it's moving its headquarters to the United States from Singapore.

At issue are the licensing fees that Qualcomm charges for patents that cover the basics of how mobile phone systems work. Broadcom now lists Singapore and San Jose as co-headquarters. Reports surfaced this week that Apple was considering eschewing Qualcomm chips entirely in its iPhones and iPads beginning next year in what would a major blow for the San Diego-based chipmaker.

Qualcomm declined to comment, while Broadcom did not immediately respond to a request for comment. It has faced regulatory scrutiny in Europe, and some shareholders such as activist hedge fund Elliott Management Corp. have said the deal undervalues NXP, a large maker of automotive and other chips. Based on 2016 revenue, the enlarged company would be the world's third largest chipmaker behind Intel Corp. and Samsung Electronics Co. and give it a huge swath of the supply chain of vital phone components such as Wi-Fi and cellular modem chips.

The two companies are already involved in big deals from about a year ago.

Other reports by TheSundaySentinel

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