In a statement today, Qualcomm said its board of directors has unanimously rejected Broadcom’s unsolicited offer. After consulting with its financial advisors, the company concluded that Broadcom’s $70-per-share proposal represents a significant undervaluation. It said its dominance of the mobile processors market and future growth prospects mean it is unable to accept Broadcom’s valuation.
Broadcom’s surprise bid for Qualcomm was announced a week ago and would have resulted in the biggest merger to date in the tech industry. If Qualcomm had approved the deal, the combined company would have created major changes in the chipmaking industry.
Qualcomm and Broadcom would be the third largest producer of semiconductors behind Intel and Samsung. Together they’d be able to achieve almost total control of the mobile microprocessor industry, preventing emerging competitors from gaining ground. This would be of particular consequence for Intel as it tries to reassert itself in mobile technologies.
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Qualcomm said the proposal wouldn’t deliver value for its shareholders. It stated its commitment to executing the strategy of CEO Steve Mollenkopf, which includes increased investment in emerging technologies such as IoT, edge computing and networking infrastructure. Qualcomm wants to power and connect every future device, an ambition it’s not confident it could achieve while operating as a joint venture with Broadcom.
“No company is better positioned in mobile, IoT, automotive, edge computing and networking within the semiconductor industry,” said Mollenkopf. “We are confident in our ability to create significant additional value for our stockholders as we continue our growth in these attractive segments and lead the transition to 5G.”
Qualcomm also recognised the deal would have “significant” regulatory hurdles attached. Qualcomm’s still being scrutinised over its own takeover of NXP Semiconductors. A merger between two of the largest chipmaking firms would attract antitrust investigators and could end up being cancelled or delayed.
It’s not yet clear how Broadcom will respond to Qualcomm’s rejection of its first offer. It could return to the table with an increased proposal or walk away entirely. With Qualcomm signalling little interest in a deal, it may not be able to achieve the outcome it originally looked for. Nonetheless, Reuters reported over the weekend that Broadcom is likely to pitch a raised bid as it aims to acquire Qualcomm’s expertise in mobile modems.
