
Broadcom Explores Deal to Acquire Chipmaker Qualcomm - prando
https://www.bloomberg.com/news/articles/2017-11-03/broadcom-explores-deal-to-acquire-chipmaker-qualcomm
======
Kelbit
There's a ridiculous amount of consolidation going on the semiconductor
industry these days.

Freescale (formerly Motorola) was purchased by NXP (formerly Phillips) in
2015. Qualcomm is in the process of buying NXP, although apparently there's
been some difficulty getting it past the European regulators. Now it sounds
like Qualcomm is going to get swallowed up by Broadcom. That's going to be a
huge company.

Last year, Microchip bought Atmel, ADI bought Linear Tech, ON Semiconductor
bought Fairchild, and Renesas bought Intersil. The year before, Intel bought
Altera.

Any bets on the last two semiconductor conglomerates standing? I'm thinking
Intel vs. Samsung. I hope whoever swallows up ON Semiconductor rebrands to the
Fairchild name - there's almost something poetic about a reverse-Fairchildren
split.

EDIT: I should also point out that "Broadcom" isn't really Broadcom anymore -
Avago Technologies purchased Broadcom last year and took on the Broadcom name
for itself. Avago was previously the semiconductor division of Agilent which
in turn was a spinoff of Hewlett-Packard. Avago traces its lineage back to the
semiconductor division of HP which was formed way back in 1961.

~~~
jjoonathan
I've heard that mergers aren't (legally) supposed to be anticompetitive, but
I've seen the banking and semiconductor industries undergo a merger-fueled
competition implosion in the last few decades, so obviously whatever
mechanisms we have in place are laughably insufficient. As a voter, what
keywords should I pick up on to fight the good fight?

~~~
baybal2
Chinese are just glad to have one big fish to swallow, instead of 20 small.

Qualcomm and Broadcomm both spent enormous funds trying to enter Chinese
market. Both ended up with Pyrrhic victories

Qualcomm sold distribution deal for China to Allwinner guys where they chew
into their already small margins - most Chinese smartphone makers simply do
not pay "Qualcomm tax"

Broadcomm bought few Chinese wifi fablesses, yanked up prices. Most Chinese
soc fablesses just switched to own internal IP

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chollida1
This might be a bit in the weeds but this is related to broadcom moving their
head quarters back to the US. If you work in the merger arbitrage space you'll
know about CIFUS, the US committee on foreign investment.

Since the silicon space has had so many deals recently and is looking at more
consolidation, moving their headquarters back to the US removes one possible
legal obstacle to buying up other semi conductors chip makers as CIFUS won't
review any deals where a US company buys another US company.

I mean, broadcom's sweetheart deal with Singapore is almost over as well, so
the financial benefits are probably over. That probably plays into their move
as well:)

If this ploy works, look for several Chinese companies to buy US companies and
looking to do reverse takeovers to get a US address for their company to
attempt to avoid the CIFUS review.

[http://money.cnn.com/2017/11/02/news/companies/broadcom-
sing...](http://money.cnn.com/2017/11/02/news/companies/broadcom-singapore-us-
move-trump/index.html)

~~~
TheAdamAndChe
Beyond high level corporate jobs, would moving headquarters back to the US
lead to more lower-class and/or manufacturing jobs? Or would the company just
be based in the US on paper?

~~~
reaperducer
The company stated that it will expand its employment in the U.S. Mostly in
research, I believe.

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ksec
So Broadcom wants to be your one stop shop for everything networking related?
Server, Switches Controller, Bluetooth, LTE, WiFi etc. On the WiFi chip there
is basically only three players left in the consumer market, Broadcom,
Qualcomm ( Atheros ) and Mediatek ( Mediatek is actually doing surprising well
)

Another point is Broadcom seems to have a very good relationship with Apple so
far. If you look at all the iPhone taken apart there are lots of Broadcom
chips in it.

Off Topic: How do these Acquisition works? I get that it is a Share + Cash.
The Share part is basically Qualcomm shareholder getting shares at the new
company, but cash, we are talking about near 100 billion acquisition, where do
the loans come from? Banks? Or could it be interest free coming from Apple?

~~~
adventured
> How do these Acquisition works?

You mostly answered it yourself. If it's an all-cash deal, of this size, they
pay for it out of on-hand cash / short-term securities, and or raise debt from
major banks or private equity types (eg Silver Lake Partners, as in the
Dell/private & Dell/EMC deals). Depending on the cost of the interest on the
debt, a company may choose to make the deal more or less cash, more or less
debt, more or less stock.

Sometimes corporate partners do throw in on the deal. Microsoft for example
helped finance the deal to take Dell private. It was obviously in their
interest to have a healthy Dell corporation. I believe Microsoft put $2
billion into that.

It wouldn't be interest free coming from Apple. Zero chance of that. They also
won't risk $100 billion. They could put in $10 or $20 billion however, with
standard loan conditions including interest.

It's going to be difficult (expensive) for Broadcom to buy Qualcomm. QCOM is
in a stronger financial position, despite the lower multiple on their stock
presently. Qualcomm's quarterly earnings are about 50% (or more) higher
typically than where Broadcom is at today. Qualcomm has $21 billion in cash,
Broadcom has a mere $5.4 billion in cash.

It should really be Qualcomm attempting to eat Broadcom, rather than the other
way around. In this case, Broadcom is being opportunistic when it comes to
timing. The result of that will (if it goes forward) be very expensive for
Broadcom shareholders. The sole reason Broadcom is able to attempt this, is
due to the stock market bubble driving Broadcom's valuation extremely high
(50+ times earnings) over the last year (the stock has climbed from ~$172 to
~$273).

~~~
charlesdm
There are ways to get these deals done without introducing PE though. Look at
the recent SABMiller acquisition by AB Inbev (different sector, same thing --
close to $100bn).

~~~
adventured
That's why I mentioned raising financing via major banks. For a deal like
that, JP Morgan, Goldman Sachs, (a dozen major Asian banks) et al. will
happily step in and help arrange the debt necessary.

Broadcom is relatively cash poor when it comes to a deal this size, and their
balance sheet is already a mess with negative $16b in net tangible assets.
Annually they're burning nearly the equivalent of a quarter worth of net
income on debt interest payments.

Given their size and the strong cash & income position of Qualcomm, there's no
doubt major banks will be very willing to help despite the weak balance sheet.
$50 billion in debt would nearly cost them all their current income. $100
billion would further chew into about 1/3 of Qualcomm's income. It's won't be
an easy debt arrangement unless they lean heavily on their bubbly valuation.

------
martin1975
It probably makes more business sense to do this mega merger/acquisition
rather than continue to sue each other into oblivion over IP. The last
settlement between QCOM and Broadcom was almost a billion dollar payment from
QCOM to Broadcom... while that may not necessarily kill off Qualcomm, can't
say it's not a major dent in their pocket after 4+ years of litigation.

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mtgx
The only reason I would want this to happen is if Qualcomm's obviously
terrible and anti-competitive leadership would get the boot. And then the
whole company's abusive culture needs to be cleaned-up.

Also, I wonder how serious Broadcom is about competing with Intel, and whether
or not they would consider purchasing AMD, too, to aid in them in that effort.
AMD's market cap is now only 1/10 of the price they intend to pay for
Qualcomm, so it's almost a matter of "throwing some extra money on the table"
at this point.

Broadcom could use Qualcomm primarily for mobile and IoT, and AMD for desktop,
servers, machine learning, and automotive.

~~~
kogepathic
_> Also, I wonder how serious Broadcom is about competing with Intel, and
whether or not they would consider purchasing AMD, too, to aid in them in that
effort. AMD's market cap is now only 1/10 of the price they intend to pay for
Qualcomm, so it's almost a matter of "throwing some extra money on the table"
at this point._

AMD effectively cannot be bought. There is a termination clause in the cross
licensing of patents between AMD and Intel for x86/x86_64 in the event either
company is sold. [0]

Anyone who bought AMD would immediately cause a huge issue for any company
manufacturing x86 CPUs. AMD wouldn't be allowed to manufacture x86-based CPUs
anymore, and Intel wouldn't be allowed to manufacture x86_64 CPUs. The only
people who would conceivably benefit from such a situation would be patent
lawyers who are probably already salivating at the mere thought of litigating
that.

[0] [https://www.kitguru.net/components/cpu/anton-shilov/amd-
clar...](https://www.kitguru.net/components/cpu/anton-shilov/amd-clarifies-
cross-license-with-intel-change-of-control-terminates-agreement-for-both/)

~~~
xenadu02
Intel already tried to raise this concern when AMD spun-out GlobalFoundries. I
assume immediately after that one of their lawyers noticed they'd lose all
rights to x86-64 if they tried to invoke the termination clause because Intel
never mentioned it again.

IMHO this is effectively a non-issue and has been from the moment Intel was
forced to abandon Itanium in favor of x86-64.

The other aspect is anti-trust. If x86 really does become single-source
(Intel) then there is no evading monopoly status. The current US
administration won't do anything about it but the rest of the world probably
will. Intel would be forced to openly license x86 anyway.

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newusertoday
looks like someone who did not wanted this deal leaked it to media. why would
one try to acquire it now when the nxp deal is still in limbo? would it not be
better to complete nxp deal and then make acquisition offer? doing it now will
create more regulatory hurdles.

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ausjke
Broadcom is awful for the open source world, it is worse than Oracle on the
software side I think. TI/Freescale and to some extent Qualcomm are open to
OSS. I hope this acquisition to fail.

~~~
srcmap
Raspberry PI's SOC is made by Broadcom. They did a decent job in open source
that part. I heard even the GPU driver/library was opensource for PI.

GPU driver/library was definitively not opensource for the Freescale's IMX6 as
far as I know.

Feel free to point out other issues with Broadcom opensource.

~~~
ausjke
the RPI is an exception, it did not come easy.

Freescale would love to open its GPU etc, however it is licensing the IP from
other vendors that Freescale has no right to open source it, yes it would be
nice if Freescale can get that part work. Otherwise, Freescale is fairly open
on everything it owns and makes.

~~~
metilda
The Raspberry Pi having a non-closed bootchain, let alone a free driver is a
feat of tens of thousands of people pressuring Broadcom, and a few people
doing the hard work to free as much of the RPI as they could.

Having to run Raspbian just to boot the board was a dark time!

~~~
bob_theslob646
>Having to run Raspbian just to boot the board was a dark time!

Is this some sort of joke I am missing becuase now the pi can run more than
just raspbian?

~~~
xfer
What? I used to run 9front(a plan9 fork) on raspberry pi back in 2013. Their
bootloader is closed source, so you have to use that to load your kernel.

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quirkot
tl;dr: deal is pending regulator approval of how many m's will be at end of
combined company name

~~~
CalChris
comcomm?

~~~
quirkot
I think BroadmmmQual has a nice ring to it (and far less misogynistic than the
reverse)

~~~
martin1975
funny, cause Quality Broad was the very first thing that popped in my mind...
I must be the only one with a sexually charged imagination here ;)

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foobaw
Why wouldn't they just M&A? Just curious.

~~~
baybal2
Because of Hock Tan's mentality, there is a long story to that

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squarefoot
Does this imply that next Raspberry PI boards will be Snapdragon based?

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bitwize
Coming soon to HN: Qualcomm to be Acquired by Broadcom; Broadcom to be
Acquired by Comcast

