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Broadcom officially drops Qualcomm bid after Trump blocks takeover

15 March, 2018, 05:56 | Author: Janis Wilson
  • Broadcom won't be getting its hands on Qualcomm's Snapdragon processor franchise.                  Qualcomm

The decision to abandon the takeover bid for Qualcomm Inc. comes after the President of the United States, Donald Trump blocked the deal on the bases of national security.

USA regulators have in recent weeks expressed concerns that the takeover could cause the United States to fall behind China in the race to develop 5G networks.

Also, The Committee on Foreign Investment in the United States, which reviews the national security implications of foreign investments in US companies, had cited concern that Broadcom has a penchant for cutting costs, which might lead to Qualcomm being less of an industry leader.

Broadcom said in a statement on Monday that it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns".

KitGuru Says: I am unsure how ironclad the order is against a future bid if certain requirements are fulfilled, but Broadcom would certainly try again if it is given the chance.

Qualcomm's dominance of baseband chips that connect phones to networks would have represented the crown jewel in Broadcom's portfolio of communications chips that supply wi-fi, graphics, video and networking features alongside baseband chips. The Ministry said that the takeover would weaken Qualcomm's position in the negotiations on the standardization of 5G solutions, and help Chinese manufacturers (such as Huawei) to dictate terms. Singapore-based Avago acquired the original Broadcom and took its name.

The Committee on Foreign Investment in the United States, which reviews the national security implications of foreign investments in US companies, cited concerns about Broadcom's penchant for cutting costs such as research spending. That theoretically gives Chinese companies such as Huawei and closest rival ZTE Corp. the upper hand in steering the direction of wireless communications development, thereby - so the argument goes - jeopardizing USA national security.

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Over the weekend, news emerged that Intel was interested in buying Broadcom, which was still looking to buy Qualcomm, which wants to acquire NXP.

"Were Broadcom to purchase Qualcomm and apply the same principles it has to other acquisitions, the likely effect would be to dramatically slow those advances down, both through the company's tactics as well as the likely departures of key employees who would be averse to working for Broadcom".

Rosenzweig added Broadcom could fire Qualcomm management, cut research spending on 5G or stop Qualcomm from participating in the 5G standards-setting process.

In its announcement today about the earlier redomiciliation date, Broadcom said it had always planned to complete the move ahead of a planned merger with Qualcomm.

The Dow Jones industrial average dropped almost 200 points, or 0.68%, Tuesday as Wall Street processed President Donald Trump's blocking of Broadcom's proposed takeover of a U.S. competitor and a surprise change of the US' top diplomat.

Broadcom had vowed earlier this month that it would make the United States "the global leader in 5G".

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