A week after the $105 billion bid was made, Qualcomm’s directors rejected the proposal, saying it undervalues the company and doesn’t take into account Qualcomm’s broad presence in the IT industry. However, Broadcom officials indicated that the rejection wouldn’t end their pursuit, and earlier in December nominated a slate of directors to replace Qualcomm’s current board.
Qualcomm pushed back, pointing to a number of challenges such a deal would face, including regulatory hurdles, Broadcom’s financing capabilities and the uncertainty of Broadcom’s plans to move its headquarters from Singapore to the United States. Officials also note Qualcomm’s future plans.
“No company in the industry is better positioned than Qualcomm in mobile, IoT, automotive, edge computing and networking and to lead the transition to 5G,” Tom Horton, Qualcomm’s presiding director, said in a statement. “Qualcomm stockholders expect a Board that will support this innovation while evaluating objectively the full range of opportunities available to maximize value for all Qualcomm stockholders.”
Qualcomm’s directors on Dec. 22 announced they had decided not to nominate any of the 11 board candidates proposed by Broadcom, saying in a statement that all were “inherently conflicted” and that they “would not bring incremental skills or expertise to the Qualcomm Board.” Instead, Qualcomm’s board is nominating all 11 incumbent members.
“Qualcomm’s existing board has a deep understanding of the global IP/licensing and semiconductor business and relevant adjacent industries, and has overseen the design and execution of Qualcomm’s strategy, including driving its leadership in mobile, IoT, automotive, edge computing and networking, as well as the coming transition to 5G,” the directors said in the statement.
“Broadcom and [financial partner] Silver Lake are asking Qualcomm stockholders to turn over control of their company now to the hand-picked Broadcom-Silver Lake nominees based on a proposal that dramatically undervalues Qualcomm and is not actionable due to its significant regulatory uncertainty, which may not be resolved for 18 months, if ever, and lack of committed financing. Broadcom has made no commitments to resolve the serious regulatory issues inherent in its proposal.”
According to a report on CNBC, unnamed officials with Microsoft and Google also have voiced concerns about the deal, pointing to Apple’s possible influence in the deal and the reputation Broadcom has for cutting costs rather than investing in innovation.
Enderle, the analyst, voiced similar concerns.
“Broadcom acquiring Qualcomm would likely kill the company,” he said. “It appears to be an effort to buy [and] then gut the firm, killing much of the R&D that makes Qualcomm differentiated in the market. It isn’t well-funded either, suggesting it is more designed to distract Qualcomm than actually become a merger.
“It would cripple Qualcomm, and that would strengthen Apple significantly in the segment, which is why Google and Microsoft don’t support the move,” he said. “Either of these firms could, and might, step in as white knights to block the merger should it suddenly appear viable. It doesn’t at the moment.”