Communication technology has substantially changed the everyday lives of people. Mobile phones have become a necessity if not a must-have device for every human being. The move has been made possible due to the prescience. The move has been made possible due to the prescience of wireless technology which has been a major breakthrough in the communication science. In this light, there is a great deal of credit that goes to Qualcomm Inc, the largest telecommunication company in the world.
The company, like any other successful entity, has a story behind it. It was started back in the year 1985 by seven individuals, where Irwin Jacobs is the main co-founder (Cook et al.). Since its inception, the company has served its customers and industry in great terms. From wireless telecommunication devises to patent licensing, its products and services have been hailed by all walks of life. It has remained committed to be a leader in wireless telecommunication technology nowadays. A substantial amount of its revenue comes from patent making while the rest is derived from microchips selling. The company is based in San Diego California. Since its inception Qualcomm has been doing very well until early this year when the company made loses causing its value to drop to $7,568. The drop has heated up different opinions and reactions from all the stakeholders. In addition, the incidence seems to attract many investors, who believe they have what it takes to revive the company back. This study will focus on the recent activities that have been happening at Qualcomm and attest an opinion of the same.
The U.S. Asks Qualcomm to Delay Meeting for National Security Review of Broadcom
The government regulator, ordered the Qualcomm Company to delay the shareholders meeting that was to come early may. The stoppage was to give room to investigate whether the intended take over by Broadcom was in order.
The surprise could have sent a message of fear to the shareholders; it is wise for such historical events to be investigated. There could be more than just business when conducting enhancing such a deal. For example, the international could be looking for ways to ship in low-quality products to the host country, thus creating a damp site in the same (Moyer). Also, it could be a way to destroy the economy as well as create a venue for smuggling illegal products cheap products and hurt the USA business. Before closing any deal with an international company, it is wise for the government to probe into the matter and ensure that it is done in an appropriate matter.
“Qualcomm-Broadcom Saga Heading to a Final Vote”
Broadcom has revealed its intention to have six board members at Qualcomm Company as a result of the heating up a takeover bid. Qualcomm has been making consistent losses over the past decade, thus plummeting its $10,000 billion investment to $7,568 making its shareholders unsatisfied(Freeman). The incidence makes a close rival company, Broadcom, to think that the shareholder will fire the majority of its directors and elect new leaders in a bid to revive the company’s profits. Broadcom has suggested a list of six members that it wishes to have them elected to the Qualcomm's board of directors. The former has been making exemplary profits under the leadership of CEO Honk Tan. Also, they think that the alternative board members are competent and qualified to act in the best interest of the shareholders of Qualcomm. On the other hand, Qualcomm argues that its board is diverse enough to understand the complexity of their business whereas that of the rival does not. In addition, seven of its members have served the company for a period of fewer than five years. The company states it has a potential to grow and raise the share value from $79 to $ 100, should the deal with NXF close. In this regard, the company suggests that Broadcom should quit seizing Qualcomm on the ground of failure.
The Governmental Intrusion into the Case
Broadcom intended takeover bid over a giant chip- communication company Qualcomm would have materialized during the general meeting that was two days away. Broadcom had appointed six of its board members who were to be elected into the rival's board of directors. However, the voting process did not go through as CFIU regulators ordered a surprise review of the plan (Polleti). All was well, and the event would have been a big win for the Broadcom. Two of the shareholders advisory firms were in favor of the company where it requested the shareholders to vote in favor of the majority if not all suggested board members by Broadcom.
The review plan has heated up hot debate among the two giant companies. Broadcom blames Qualcomm for secretly instigating the review without their knowledge. The latter filled the request on 29th January this year with the CFIU regulators. While may blot the well-laid plans of Broadcom, by having successfully dismissed such deals by foreign Chinese investors, the effect might not be the case here. As a matter of fact, the majority of the investors and analysts are in favor of a takeover bid.
Qualcomm's Troubles to Persist Even as Broadcom Pursuit Blocked
After the blockage of the takeover bid by the USA president, Qualcomm has escaped from the trap of being controlled by its rival Broadcom. The company is now left with the obligation to deliver its promise to the shareholders and revive the company back to its normal course. The company is still strolling with the purchase of the NXP; a deal that it has been trying to close for close to a year. Now as the company is on its own, it is scheduled to meet its shareholder on 23rd this month at the annual general meeting that had been postponed pending the investigation with CFIU.
Attaining the goals is far from the assured cause, this caused by the weakening demand for the Smartphone as well as the move by the apple that has stopped paying, waiting to settle their scores in the court (Bass). The company derives the majority of its profits from them. The patent licensing business has been hit by hard fines around the word thus affecting the annual profits and revenue generation. No matter how much the company invests in the research and development, the profitability will not change any better due to the problems it is already struggling with.
Qualcomm has a new Chairman; Broadcom to be a U.S. company on May 6th
As the company headed to the voting process of its eleven board members, Qualcomm has named Jeffry Henderson as the new non-executive director who will be replacing Paul Jacobs. The former has been serving the board since 2016 to date. The latter is the son of the co-founder and has been serving the board since the year 2005 (Friedman). The notion of naming the non-executive director is probably to give the shareholders the feeling that they are lead not by an insider but an independent individual who will increase their value and wealth.
As the voting is pending and Qualcomm still remaining a target for Broadcom, the CFIU is clear about it suspicion about the deal. Even if the voting process went through, the agent could still call of the voting should they have something substantial to qualify their concerns. The merger for the two has raised concerns that to the lawmakers, which has led the chairman of Broadcom to write them a letter stating that the intention was, meant to make the company one of the leading in the history of telecommunication spectrum. With the 5G technology pending, the government is worried that the acquisition might alter the movement.
Broadcom Keeps Fighting for Qualcomm With Over $100 Billion At Stake
Broadcom shows no signs of retreat from hostile takeover bid of Qualcomm Company. The prospects have a lot of benefits including $117 billion from an array of investors, thus there is no way Broadcom will let go off such a deal easily. However, Qualcomm board is intact and will not accept the deal anytime sooner as they push for better terms and conditions. In addition to that, security agencies have raised concern over the deal citing the violation of national security (McGregor, 2018). The wrangle is not a surprise given that the deal is one of the largest in the history of communication technology.
The fight was preceded by the postponement of the annual general meeting that was scheduled for Tuesday 6th of March 2018. Both companies were vigorously persuading the shareholders to vote in board members of their choice. Broadcom had proposed a total of six boards which would make its own the majority of board members, an event that would have substantiated its takeover bid to Qualcomm.
Broadcom is not giving up in the fight for the same in that, it has promised to increase Qualcomm engineers as well as investments in 5G. The pledge comes shortly after the USA government ordered for an investigation of the implication that the takeover would have particularly to the national security as well as the competitiveness of the business.
American regulators have held up Broadcom's hostile takeover of Qualcomm over concerns the deal could harm national security. Now, we know why.
The committee on foreign investment of the US has finally laid out some of its concerns in a letter dated 5th Monday this month. The committee is chaired by the treasury board and is mandated to investigate deals that could be detrimental to the USA businesses. The board said it was evaluating the risky deal that was associated with Broadcom's relations with third-party foreign investors (Horowitz). Also, the letter raised concern over the bids effects to the overall our business in the technology sector. The letter has led to the delay of the meeting that could have determined if the bid would mature or not. Broadcom had put a list of board members that would have been chosen in their favor. The meeting was such a so material for the company.
The US says it has confirmed national security concerns over Broadcom-Qualcomm deal
The government issued a warning to Broadcom over their attempt to take over Qualcomm saying that they had violated the previously arranged order. The committee had enough evidence to confirm the security concerns it had raised. It said that the deal was a subject to further investigation and that it needed the attention of President Donald Trump. The government's major concern was whether Qualcomm would be in a position to stand the Chinese competition should the deal go through. The government is upfront to ensure that the foreign investors do not take charge or rule over the business in the United States. Broadcom has slashed research and development costs and there is a big worry as to how they are going to foster development in the intended 5G technology (Moyer). To placate the effect, Broadcom said that it was dedicated to making the combined venture the next biggest leader in the mobile technology. The letter from the two lawyers stated that Broadcom had violated the CFIU order for making an attempt to relocate its headquarters to the USA without issuing a notice of their intentions. As the matter seem to wiggle, the fate of the deal is not yet known.
Trump Blocks Broadcom Takeover of Qualcomm on Security Risks
On Monday the 5th of March this year, President Donald Trump issued a latter blocking Broadcom from perusing its hostile takeover against Qualcomm due to national security concerns. The president acted upon the recommendations of the committee of foreign investment in the United States. The blockage confirms tough stance by the Trump's administration to the way of foreign investors from taking over the US technology firms. In their response, Broadcom has stated that the matter did not raise any national security concern and that it was totally unfair (McLaughlin). According to the CFI, Broadcom did not agree to take over the company, but it was rather fighting to gain control over the board of its rival, and then control its business. The order of Trump comes in the amidst Broadcom's move to relocate to the USA.
Broadcom ends Qualcomm bid after President Trump tanked deal
After long hours of trying to win Qualcomm in hostile takeover, Broadcom is abandoning its proposed acquisition bid. The decision followed the order by Triumph which was promised on security grounds. US feared that Qualcomm could fall under the control of an Asian company, which would impede technology growth in the states. Broadcom, though disappointed by the decision, agreed that they would comply with Triumph’s order. As a result, they will withdraw the board members they had recommended for voting in Qualcomm’s annual general meeting. The decision come in a time when Broadcom was contemplating moving to the US in order to stand a better chance for the hostile takeover. Broadcom thanked Qualcomm for the support they had given them throughout the process.
Opinion
No matter what is said and done, Qualcomm is in danger of collapsing in a few decades. With the figures falling from $10,000 to $7,546, the company is trending in a very risky zone. The decline has opened a ventilation for a close rival to think that it can have its way into the company by purchasing it. The proposal by Broadcom should be valued and investigated to disclose the intention behind it. To revive the company and increase its value it should be accepted and materialized for the benefit of the shareholders.
Broadcom is under the management of a performing leader, Hunk, who has the capacity to take the company to the next level. The USA is being overprotective of its company such that it cannot see the effect this has on the investors. It is high time that the President considered the deal beneficial to the USA in general. In addition to that, the intention of Broadcom to move its headquarters to the United States should not raise any national security concern. The big issue is that the government is afraid that the chine firm will take the lead of the market and all the credit will go to them.
The change of the chairman Paul Jacobs is a clear indication that the company acknowledges that everything is not well. In addition, now that the bid has been blocked, the company is on its own to deliver the promise to the stakeholders. Qualcomm is marred by a series of problems starting from the declining demand of smartphones to the patent licensing business. Besides, Apple, one of the Qualcomm's biggest customers, has stopped paying fees to the company pending legal issues to be settled in the court (Stern 102). The summation of all these issues calls for a total change for the company. Otherwise, it would be hurt badly in the near future. The company should consider all possible means that have potential to get it back on track. In as much as the government wants to preserve its pride and business, it must also consider the well-being of all stakeholders.
The merger of the two companies would be a great deal for all. Firstly, the two great minds or chipmakers coming together will open doors for new inventions. Both companies are marching towards the same direction and if merging together the journey will be excellent and easier for the two. Secondly, Broadcom wishes to take its headquarters to the US which will be a great win for the government. Instead of telling of such a huge deal, it should let it close and develop policies and procedures to protect the business in all ways possible. It should embrace the deal and develop ways to regulate the business while still leaping the benefits.
In as much as Qualcomm defies the proposed plan, at the end of it, all the process will go through. By secretly requesting for the review in order to hold back the voting and to probably scare aware Broadcom, it proves Qualcomm are aware of what is coming. At the heart of acting in the best interest of the shareholders, both companies should sort their differences out and focus on beneficial matters to the clients. If the Broadcom has the capacity to increase the value of the shareholders, which is the main interest of the shareholders, then the two companies should consider the deal. The CFIU probe is not significant at all, given the fact that Broadcom intends to base itself in the USA. If the company has been making losses under the regime of the current board, then it is time to have an overhaul of the same for better results.
Works Cited
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https://www.usatoday.com/story/money/2018/03/14/broadcom-qualcomm-president-trump/423236002/
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McGregor, Jim. “Broadcom Keeps Fighting For Qualcomm With Over $100 Billion At Stake.” Forbes, Forbes Magazine, 9 Mar. 2018, www.forbes.com/sites/tiriasresearch/2018/03/08/broadcom-keeps-fighting-for-qualcomm-with-over-100-billion-at-stake/#6b96d4671ebe.Acessed 13 March 2018.
McLaughlin, David. “Trump Blocks Broadcom Takeover of Qualcomm on Security Risks.” Bloomberg.com, Bloomberg, 12 Mar. 2018, www.bloomberg.com/news/articles/2018-03-12/trump-issues-order-to-block-broadcom-s-takeover-of-qualcomm-jeoszwnt.Acessed 13 March 2018.
Moyer, Liz. “US says it has confirmed national security concerns over Broadcom-Qualcomm deal.” CNBC, CNBC, 12 Mar. 2018, www.cnbc.com/2018/03/12/us-tells-broadcom-it-confirmed-security-concerns-in-qualcomm-deal.html.Acessed 13 March 2018.
Poletti, Therese. “Qualcomm was losing in takeover battle with Broadcom, then the government stepped in.” MarketWatch, 7 Mar. 2018, www.marketwatch.com/story/qualcomm-was-losing-in-takeover-battle-with-broadcom-then-the-government-stepped-in-2018-03-05. Acessed 13 March 2018.
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