Qualcomm Continues To Reject Broadcom’s Advances, But Doesn’t Rule Out Continued Discussions

Earlier this week, Qualcomm issued a press release to say that it was going to be meeting with top brass at Broadcom to discuss acquisition talks further, and today, the company has issued its full response after considering all that was said. Up to this point, Qualcomm (NASDAQ: QCOM) has been adamant about the fact that it’s being undervalued, so it never felt like these talks were going to blossom into something fruitful. Thus far, that’s proven to be the case.

Even if Qualcomm were interested in the final offer on the table from Broadcom (NASDAQ: AVGO), valued at $121 billion USD, both companies would have to deal with some severe legal hassles to get approval from the powers that be. Prior to this meeting, Broadcom didn’t give solid enough assurances that it’d handle the important legal rigmarole, and since it’s the one that wants this acquisition so badly, it should.

During this meeting, Broadcom did give Qualcomm some additional assurances that made the overall prospect more positive, but the company still doesn’t have interest, and ultimately, it’s because of the high level of risk. Paul E. Jacobs, Qualcomm’s Chairman of the Board, writes in his letter, “The Board remains unanimously of the view that this proposal materially undervalues Qualcomm and has an unacceptably high level of risk, and therefore is not in the best interests of Qualcomm stockholders.”

Despite Broadcom improving upon some of its commitments during this meeting, it still wasn’t enough. The letter continues, “Broadcom continued to resist agreeing to other commitments that could be expected to be required by the FTC, the European Commission, MOFCOM and other government regulatory bodies.”

The letter finishes by saying that Qualcomm isn’t opposed to further offers, and in fact it’s “intensely focused on maximizing value” for its shareholders, whether that’s through a sale or increased gain through continued market growth. “If such a proposal cannot be obtained from Broadcom, our Board is highly confident in Qualcomm’s ability to deliver superior near- and long-term value to its stockholders by continuing to execute its growth strategy.”

Broadcom has said that its second offer was “final”, so if it sticks to its word, this will be the end of that. However, given just how aggressive the company has been these past few months, it seems unlikely that it’s going to stop here. But for the industry at large, it’s hard to view a failed acquisition here as a bad thing. Moor Insights & Strategy’s founder and principal analyst Patrick Moorhead put it perfectly: the two companies are like oil and water. If Broadcom is the lone potential suitor, Qualcomm, and its shareholders, are going to be better off on their own.