Qualcomm's stock soars on reports that Broadcom wants to buy it

Broadcom Ltd. reportedly is mulling over a bid to acquire rival chip maker Qualcomm Inc., a deal that could top $100 billion and be the largest in the semiconductor industry.

The stock of San Diego-based Qualcomm shot up more than 15% at one point during trading Friday after reports surfaced that Broadcom was considering making an unsolicited offer.

Qualcomm rose $6.97, or 12.7%, to $61.81 share, giving it a current market value of $91.3 billion. Broadcom rose $14.13, or 5.5%, to $273.63 a share.

Qualcomm and Broadcom declined comment on the reports from Bloomberg and the Wall Street Journal, but Broadcom Chief Executive Hock Tan has a history of aggressively acquiring companies to bolster his company’s growth.

The reports came one day after Tan held a news conference with President Trump to announce that Broadcom, currently based in Singapore with a primary U.S. office in San Jose, plans to move its corporate domicile to the United States.

Broadcom was created last year when Tan’s Avago Technologies Ltd. bought Irvine-based chip maker Broadcom Corp. for $37 billion and then adopted the Broadcom name for the combined company.

Should Broadcom launch an offer for Qualcomm, it’s not clear whether Qualcomm would be receptive or whether the deal would pass muster with federal antitrust regulators.

Some analysts suggested that one reason Broadcom is moving its domicile to the United States is that the company might find it easier to get U.S. regulatory approval for future acquisitions.

It’s also unclear what a deal with Broadcom would mean for Qualcomm’s current bid of nearly $40 billion to purchase NXP Semiconductors, a deal that’s facing stiff regulatory reviews in Europe and opposition from some investors who contend the bid undervalues NXP.

Regardless, if Broadcom launches a bid it “would be a pretty big deal” to combine two of the world’s top chip makers, said Seth Kaplowitz, a finance lecturer at San Diego State who tracks the technology industry.

“From a strategic standpoint I think Broadcom would be making a very smart move,” in large part because Qualcomm is a top player in the development of so-called 5G technology, the next generation of faster speeds for phones and other wireless devices, Kaplowitz said.

Qualcomm, with revenue of $22.3 billion in its fiscal year that ended Sept. 24, is a leading maker of chipsets, or collections of integrated circuits, used in mobile phones.

The company also earns substantial revenue from licensing its technology. But Qualcomm has struggled in recent quarters, partly because of a legal battle with Apple Inc. over Qualcomm’s patent-licensing model.

Apple has stopped paying Qualcomm for use of its intellectual property during the dispute. Some recent published reports also said Apple was considering dumping Qualcomm’s chips from next year’s versions of iPhones and iPads.

As a result, Qualcomm’s stock had tumbled 16% this year before the Broadcom reports surfaced, perhaps giving Broadcom added incentive to propose a buyout now.

Broadcom reportedly is considering an offer of $70 a share in cash and stock for Qualcomm, which would price the deal at about $103 billion.

Broadcom also makes chips embedded in smartphones, along with those that help power cable set-top boxes, broadband systems and myriad other computing products. Its sales totaled $13.2 billion in Broadcom’s fiscal year that ended Oct. 30, 2016.

The original Broadcom, co-founded by Henry Samueli and Henry T. Nicholas III, grew from its roots in a Santa Monica condominium in the early 1990s into a powerhouse in Irvine that helped turn Orange County into a technology hub.

Broadcom’s customers also include Apple, along with other tech giants such as Amazon.com, DirecTV and Samsung Electronics Co.

james.peltz@latimes.com

Twitter: @PeltzLATimes


UPDATES:

3:10 p.m.: This article was updated with comments from an industry analyst.

2:05 p.m.: This article was updated with additional details about Qualcomm and Broadcom’s lines of business, Qualcomm’s dispute with Apple and background on the original Broadcom.

This article was originally published at 12:45 p.m.

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