US Presidential Order Prevents Broadcom From Acquiring Qualcomm

Following a frustrating few months of Qualcomm battling Broadcom in its attempt at a hostile takeover, none other than the President of the United States decided to step in like a playground hero and break things up. Officially, Broadcom’s pursuit of Qualcomm is over, seemingly entirely to do with concerns of national security.

This decision from the White House came immediately after Broadcom (NASDAQ: AVGO) announced that it was just about done with its move to the United States. Currently, the company is still based in Singapore, despite having a massive presence in San Jose, California.

From Qualcomm’s (NASDAQ: QCOM) press release:

Qualcomm Incorporated (NASDAQ: QCOM) today received a Presidential Order to immediately and permanently abandon the proposed takeover of Qualcomm by Broadcom Limited (NASDAQ: AVGO). Under the terms of the Presidential Order, all of Broadcom’s director nominees are also disqualified from standing for election as directors of Qualcomm.

Ultimately, this means that Qualcomm is safe from Broadcom, and I don’t say “safe” lightly. It was hard to find a single person who thought the Broadcom deal should have gone through, outside of Broadcom itself, and allegedly for increased national security, the deal simply couldn’t have happened.

The White House letter doesn’t lay out specifics about why Broadcom integrating with Qualcomm would be considered a risk to national security, but analysts have tied it to lack of innovation and product development on Broadcom’s part. Broadcom could have also been seen as a plant, putting the country in a position like China, which exercises caution about which US-based chips it uses. Trust is hard to come by in the microprocessor game.

This move will help Qualcomm relax a bit, but it’s hard to tell whether it will hurt or help its pending acquisition of NXP. It also doesn’t tell us what Intel (NASDAQ: INTC) might do. Last week, it was revealed that the company would consider purchasing Broadcom if the acquisition of Qualcomm was successful, bit given Intel’s modest smartphone presence, it’s not as though an acquisition of Qualcomm still wouldn’t be worth pursuing, and as a US-based company, it wouldn’t raise the same risks.

That’s not to say that an Intel acquisition would be ideal either, though. If Intel’s had limited success in mobile, and Qualcomm has had enormous success, such a move could still bode bad things for the future of this San Diego native.