Qualcomm Bolsters Its Defenses, Lays Out Strong Reasons For Remaining Independent

The Qualcomm vs. Broadcom fight has been ongoing for months, and with Broadcom’s continued aggression, it could be considered a fierce one. The situation is soon to reach a critical point, though: on March 6, votes will be tabulated to figure out whether or not six ‘independent directors’ from Broadcom will be allowed to join Qualcomm’s board, which would improve (quite dramatically) its chances at a takeover.

Shareholders are currently being sent voting cards from both companies, and if you believe Qualcomm (NASDAQ: QCOM) should remain independent, you’ll be looking for the white card. On the Broadcom (NASDAQ: AVGO) side, blue cards handle those respective votes. If you change your mind before March 6, you can replace your vote – the last one submitted is the one that counts.

If you’ve been following along at all lately, it shouldn’t be that hard to choose sides. Broadcom has been aggressive since the start, and has seemed to throw caution to the wind in some regards, such as with potential (or definitive) legal hurdles that such an acquisition would sprout.

Qualcomm continues to believe that it’s being undervalued by Broadcom, based on the most recent offer of $82 per share. The company notes that the initial offer of $70 per share was “so low that it did not merit engagement”. Despite that, Qualcomm has continued to listen to Broadcom’s arguments, to make sure its shareholder interests come first.

Ultimately, the San Diego-based Qualcomm says that the San Jose-based Broadcom isn’t taking certain issues seriously enough, making acquisition prospects scarier than they should be. The company’s board believes that the price, closing certainty, and also licensing business, complicates the most recent offer from being seriously considered.

Qualcomm and Broadcom compete in many areas, including networking

Qualcomm lays out a list of pros for continuing to put faith in its current board of 11 members. The company assures its shareholders that it will continue to fight for their best interests, and continue to grow their share value over the next year (in effect worsening Broadcom’s offer). You’d also vote against “a group of directors who are inherently conflicted and are not the right people to negotiate a good deal on Qualcomm stockholders’ behalf”.

Conversely, Broadcom claims that Qualcomm has feigned engagement up to this point, which wouldn’t be a huge surprise considering the biggest bullet-point (price) has fallen flat with each subsequent meeting. Despite that, Broadcom believes that its offer is more than fair, and that it’s willing to fight for Qualcomm’s shareholders by considering “all paths to maximize stockholder value”.

I continue to be of the mind that a Broadcom acquisition of Qualcomm would be a bad move. It might pay off in the short-term for investors, but there’s greater potential from Qualcomm in the near future, especially as its NXP acquisition is on the cusp of being completed. An independent Qualcomm is an interesting Qualcomm, and we don’t have enough independent powerhouses left.