Broadcom Continues To Chase After Qualcomm, Decides To Pony Up $121 Billion

Since it made its original offer in December, Broadcom (NASDAQ: AVGO) hasn’t taken its sights off of Qualcomm (NASDAQ: QCOM). In fact, the company has only become more aggressive, tackling the acquisition from every angle to convince audiences that it’d work out. The offer in December was valued at $70 per share, with $60 paid in cash, and the other $10 paid through Broadcom stock. Today, Broadcom has increased its offer to $60 in cash, and $22 in Broadcom stock, giving the proposed deal a value of $121 billion USD.

From the beginning, Qualcomm has said that even if it were interested in a deal, the regulatory rigmarole for approval would take about 18 months. Broadcom has always disagreed, but has amplified its assurances by essentially offering Qualcomm a no-risk guarantee, promising a “ticking fee” that would be provided in the event the deal is not over within a year, and a reverse termination fee if regulation roadblocks arise.

The fruits of Qualcomm’s 5G labor are expected to be seen later this year

The $70 share in December may have seemed unattractive to Qualcomm, and for agreeably good reason. $121 billion is a lot harder to ignore, however. This latest attack by Broadcom landed at the same time rumors began to creep out that Apple is planning to go all-in on Intel (NASDAQ: INTC) for modems that go into its iPhones. Such a move would be huge for Intel, but a real blow to Qualcomm, making the current offer appear even more lucrative.

At the same time, nothing has changed with regards to Qualcomm’s roadmap. In 2018, the company will be putting up its real first fight against Intel’s server market, with the Centriq CPU series, and the first “all day” LTE laptops are expected to land in a couple of months. And, in addition to the company’s huge VR/AR/XR push, the company is gearing up for the massive 5G roll out that will hopefully kick off by the end of the year.

While both Broadcom’s and Qualcomm’s stocks are down a few percentage points today, this latest proposal happened to occur on a day that the markets are seeing a frustrating amount of red. Nonetheless, Broadcom has claimed that this is its final offer, so it shouldn’t be long before we hear from corporate on its decision.

If Qualcomm does in fact agree to this deal, CNBC reports that it would create $3 billion in synergies, and in effect result in thousands of layoffs. However, some analysts are digging for the upside, stating that the industry is in such bad need for tech talent, that anyone considered redundant should find some quick work. If only it were always as easy as that sounds.

It’s undeniable that if Qualcomm were to agree to an acquisition based on Broadcom’s terms, its shareholders would come out ahead in the near-term. At the same time, I still don’t have faith that Broadcom is a suitor we’d see ever behind an ultra-successful future Qualcomm, in terms of product development and its role in delivering technologies which positively impact our digital lives. The company is currently pretty nimble, and its goal is to innovate. My gut tells me that if Broadcom swallows Qualcomm up (making for a commical name pairing), the San Diego native may seem less interesting going forward. Broadcom isn’t exactly the most exciting company on the block.