Broadcom has confirmed reports that it is to acquire rival chip maker Qualcomm in a deal valued at a whopping £98.8 billion - and includes Qualcomm's ongoing NXP acquisition.
Founded in 1985 in San Diego, California and boasting revenue of $23.55 billion at the company's last financial filing, Qualcomm is a giant in the embedded and telecommunications world. Its system-on-chip (SoC) processors and cellular modems can be found in an overwhelming number of smartphones and tablets from a range of manufacturers, but an ongoing legal spat with Apple - its biggest single customer - has hurt the company badly. Following the news that Apple was to cease using Qualcomm parts in favour of those from rival Intel, Qualcomm has found itself a safe haven in the form of Broadcom - itself founded in 1961 as Avago Technologies, a Hewlett Packard subsidiary.
Interestingly, the deal will see the smaller company swallowing the larger: Broadcom's last financial year showed $13.24 billion in revenue, nearly half Qualcomm's income for the same quarter, while the company has around half the global headcount of its acquisition - not even counting NXP, itself in the process of being acquired by Qualcomm, though the deal will go ahead whether the NXP acquisition is closed or not, Broadcom has confirmed.
'Broadcom's proposal is compelling for stockholders and stakeholders in both companies. Our proposal provides Qualcomm stockholders with a substantial and immediate premium in cash for their shares, as well as the opportunity to participate in the upside potential of the combined company,' claims Hock Tan, Broadcom president and chief executive, of the deal. 'This complementary transaction will position the combined company as a global communications leader with an impressive portfolio of technologies and products. We would not make this offer if we were not confident that our common global customers would embrace the proposed combination. With greater scale and broader product diversification, the combined company will be positioned to deliver more advanced semiconductor solutions for our global customers and drive enhanced stockholder value.
'We have great respect for the company founded 32 years ago by Irwin Jacobs, Andrew Viterbi, and their colleagues, and the revolutionary technologies they developed. Following the combination, Qualcomm will be best positioned to build on its legacy of innovation and invention,' continues Tan. 'Given the common strengths of our businesses and our shared heritage of, and continued focus on, technology innovation, we are confident we can quickly realize the benefits of this compelling transaction for all stakeholders. Importantly, we believe that Qualcomm and Broadcom employees will benefit from substantial opportunities for growth and development as part of a larger company.'
The deal would create a company with a combined revenue of $51 billion for the coming financial year, while also providing Qualcomm with security should Apple make good on its promise and walk to Intel. Qualcomm, however, has yet to agree: Describing the offer as 'non-binding' and 'unsolicited,' the company has stated it will withhold comment until its board of directors has completed a full review.
May 15 2020 | 11:00