Broadcom Explores Deal to Acquire Chipmaker Qualcomm
bloomberg.com
bloomberg.com
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.
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
Broadcom had also acquired Netlogic/RMI before that, so it is consolidation all the way down.
Analog device bought Hittite and destroyed a good web site.
As long as they leave LTSpice alone.
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...
That's not how review works. They look at the ownership of the company in question. It's not enough to just pretend to have a US shell doing the buying, while it hides a Chinese government parent. For reference, according to the CEO of Broadcom, his company is ~90% owned by US investors.
Just having a Chinese entity (whether Alibaba or a government corporation) holding a large ownership position in the company doing the acquiring, is enough to trigger review and a possible rejection depending on what's being acquired.
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?
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).
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.
What Hock Tan did his whole career - he used patently massive short term debt leverage to buy something big and then sell less tasty parts quickly to get rid of that debt, no matter what harm it did to the company being bought.
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.
Lots of growth occurred at Qualcomm since then. I'm assuming most of the leadership changed as the company became more and more profitable.
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...
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.
Qualcomm is largely responsible for how proprietary and draconian most mobile phones are, though.
Now that's hardly a big focus of Broadcoms business but you can pretty much run a fully open source GPU accelerated Linux userland on the Raspberry Pis with those efforts.
Bluetooth and WiFi is proprietary though, if I remember correctly. And that is what Broadcom makes money with.
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.
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.
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?