Broadcom is reportedly interested in purchasing Qualcomm

by Linda Olson November 4, 2017, 0:11
Broadcom is reportedly interested in purchasing Qualcomm

Shares of Qualcomm have spiked after reports from the Wall Street Journal and Bloomberg News that rival chipmaker Broadcom may be preparing a bid.

At the company's 4G/5G Summit taking place in Hong Kong, Qualcomm has announced the first successful test of a 5G data connection on its 5G modem chip-set for mobile devices - the X50.

Stockholders could be the reason for this jump in the price but the reason why they might be going through with this plan is that Qualcomm is now in a legal dispute with Apple, who has been a long-term client of the chipmaker for its modem business. Qualcomm's market value is $90 billion, according to FactSet. Qualcomm, in suing Apple, says it is not obligated to license those like to does with industry standard technology.

Share value in Qualcomm is up almost 14 percent on the news. Even though Qualcomm's component is considered to be the best, Apple is trying to get back at the company for various patent and legal issues. Both Broadcom and Qualcomm have pending deals that could be affected by a merger. However, Apple may ditch Qualcomm altogether and develop future iPhone and iPad units that rely only on Intel modems, which would drastically affect Qualcomm's bottom line. Qualcomm's shares soared 12.71% on the rumor, or $6.97, to $61.81.

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It is also possible that Broadcom wishes to purchase Qualcomm so that the legal battle with Apple draws to a close and because the chipset manufacturer could eventually become an industry arm of Apple's supplier.

Broadcom, a major supplier of iPhone parts that counts Apple among its largest customers, said this week it will return its headquarters to the USA from Singapore.

Qualcomm declined to comment, while Broadcom did not immediately respond to a request for comment. It's entirely unclear what would happen to Qualcomm's legal fight with Apple if it does sell itself, but it's likely Broadcom would settle the dispute to avoid incurring more legal costs.


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