Here is something I never thought was possible, – a $130 billion acquisition. That’s the exact amount Broadcom is ready to pay to buy Qualcomm. If this deal pans out, it’s going to be one of the biggest tech acquisition ever. So why is Broadcom shelling out so much for Qualcomm, and is this transaction really worth it? Before answering that, let’s check the background of both of the companies
Broadcom is a global semiconductor leader, manufacturing anything from wired infrastructure to wireless communications, enterprise storage, and industries among others. Their products include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems, and displays.
If you use an Apple smartphone user (iPhone), then you are definitely using Broadcom components, and that’s one of the simplest ways to explain it.
“Qualcomm is an American multinational semiconductor and telecommunications equipment company that designs and markets wireless telecommunications products and services. It derives most of its revenue from chip making and the bulk of its profit from patent licensing businesses.” – Wikipedia
And if you didn’t already know, Qualcomm is the maker of the Snapdragon line of processors. You are probably using a Qualcomm made processor on your smartphone right now.
Why is Broadcom paying $130 billion?
When we talk about deals that involve a huge much investment, there needs to be a long list of reasons. Broadcom surely has quite a few compelling reasons of its own. For starters, we can see that Broadcom wants to “create a one-stop shop for smartphone makers looking for everything from cutting-edge processors to wireless networking.”
“The thing about technology is that many skeptics just don’t understand how the industry has gotten so much bigger, which means these companies are a lot more valuable to each other than you might think.”
-mad money host
In the world of semiconductor revenue sales, Intel leads the bunch followed by Samsung Electronics. And if this deal in talks was to go through, Broadcom/Qualcomm partnership will see them take the third spot by a margin.
Lots of factors go into making these kinds of decisions. And when it’s one of the biggest potential deals, the stakes are even higher. We should also consider that this deal will most probably not go through.
“A deal would face antitrust scrutiny in markets where Broadcom and Qualcomm have leading positions, such as integrated circuits used in global navigation satellite systems,” says Erik Gordon, a professor at Ross School of Business, University of Michigan.