With its profits plummeted more than 90 percent in the latest earnings call, Qualcomm could be fighting a losing legal battle with Apple, giving Broadcom the flawless opportunity to acquire the chipmaker in what could be the largest chip business acquisition ever.
The news, reported by Bloomberg today, would value Qualcomm shares at around $70, and investors immediately responded enthusiastically by sending Qualcomm stock up almost 14 percent in what Bloomberg says is the largest stock movement for the company in almost a decade.
The stock of San Diego-based Qualcomm shot up 12% to $61.65 a share in midday trading Friday after reports surfaced that Broadcom was considering making an unsolicited offer.
No final decisions have been made and there is no guarantee a deal will go ahead. Qualcomm's stock is down 16 percent this year, excluding the jump prompted by the Broadcom news today, and it suffered a staggering 90 percent drop in profit in its fourth quarter earnings released earlier this week. Qualcomm has a market cap of around $92 billion as of writing while Broadcom is worth almost $113 billion. Broadcom, created in 2016 when Avago Technologies Ltd. acquired then-Broadcom Corp. for $37 billion, has built itself from a former division of Hewlett Packard into one of the industry's largest chipmakers via a string of purchases.
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. 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. The Wall Street Journal quickly confirmed the news in its own report.
At issue between Qualcomm and Apple are licensing fees the chipmaker charges for patents that cover the basics of how mobile phone systems work. Regulators are still reviewing Qualcomm's $38.1 billion proposed acquisition of NXP Semiconductors for $38.1 billion. Broadcom also supplies is a major supplier of parts for Apple's iPhone, and new management might be better positioned to resolve the dispute, Bloomberg noted.