While the legal saga between Apple and its former chip supplier, Qualcomm, rages on behind courtroom doors, a new report claims that one of the San Diego, California-based chip-maker’s largest direct competitors may be eyeing it for a potential $100 billion acquisition, in what Bloomberg suggests would represent “the biggest-ever takeover of a chipmaker.”
According to sources who spoke to the paper on condition of anonymity, it’s Qualcomm’s chief, chip-making rival, Broadcom, who’s allegedly employed a band of advisers to begin assessing the potential of a takeover deal, which, if successful, would bring the value of Qualcomm’s shares to an even $70 apiece. As of Monday morning, QCOM shares were up 14% on the news before dipping slightly in after-hours trading.
Why Are Investors So Happy?
Since their back-and-forth legal saga began earlier this year, the value of Qualcomm stock has dipped by +/-28%. And therefore, with no resolution to their dispute in sight — and Apple fully-prepared to spend whatever it takes to win — the potentiality of Qualcomm simply “settling the score,” as its CEO has suggested will ultimately come to pass, seems less probable by the week.
Moreover, during its latest quarterly earnings call, Qualcomm CEO Steve Mollenkopf acknowledged that his firm’s profits were down by an unprecedented 40% during the fiscal fourth-quarter, noting specifically how they were “negatively impacted as a result of actions taken by Apple and its contract manufacturers.”
Indeed, their legal battle has been storied from the get-go — and it’s since evolved even more to include the backing of several leading government agencies, including the Federal Trade Commission in the U.S., and its Taiwanese counterpart, who point to a wide range of anti-trust, anti-monopoly and anti-competitive complaints against Qualcomm.
And so, as it continues facing pressure and opposition on multiple fronts, with some government agencies already handing down their own hundred-million dollar judgments against it, Qualcomm’s options are growing noticeably thin.
Qualcomm Broadcom Merger Benefits
Quite honestly, though, at this point a takeover by Broadcom might be exactly what Qualcomm needs to get back in the black.
Broadcom, which already provides Apple with Wi-Fi/Bluetooth combination chips for its iOS and some macOS devices, has been making big moves since it was acquired by Singapore-based Avago Technologies, Ltd. back in 2015 for an estimated $37 billion. The newly formed entity, which trades under the ticker symbol AVGO but still retains the Broadcom name, is currently looking to move its worldwide headquarters from Singapore back the U.S., according to the report.
So if the takeover attempt is successful, we could ultimately see Broadcom relocate its HQ to Qualcomm’s current facilities in San Diego, which would not only give the empowered chip-giant a strategic real estate holding to expand its business, but also a unique opportunity to develop and build upon newer, more exciting technologies like Qualcomm’s under-the-glass fingerprint scanner that’s currently in development, or even a newer, more powerful generation of Snapdragon processors.
And with regards to the ongoing legal battle, itself: a Broadcom acquisition of Qualcomm could also (potentially) open the door to settlement talks that would allow Apple and the rest of the tech world to return to normalcy.
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