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Broad/Qual/NXP Battle Begins

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rick merritt
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Broadcom's alternatives
rick merritt   11/13/2017 5:22:37 PM
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In a research note this morning, financial analyst Rohmit Shah of Normua Instinet said these are among Broadcom's alternatves at this stage:

"(1) Broadcom could announce a slate of directors to be voted on at the QCOM annual meeting. The nomination deadline is December 8, though shareholders could call a special meeting at other times during the year...

(2) The company could launch a public exchange offer for all shares of QCOM—at the current $70 value or at a different price. Acceptance of shares would be contingent upon entry into a merger agreement and receipt of regulatory approvals. With those conditions, the offer would signify shareholder support for a deal.

(3) In light of regulatory uncertainty, Broadcom can build credibility by filing for regulatory approval even without a merger agreement in place."  

jmrowca
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Do not be surprised if TXN goes after NXP now
jmrowca   11/15/2017 11:06:19 AM
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Rich Rich Templeton is sitting on a ton of cash and may have some interest in some of the NXP+Freescale lines. Don't forget the former 2 CEOs were ex-TIers that were one time under his control. CFIUS may look favorably on a TXN intervention.

elizabethsimon
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Re: Do not be surprised if TXN goes after NXP now
elizabethsimon   11/15/2017 11:35:39 AM
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TI buying NXP.... Now there is an idea.   The company I work for uses a lot of Frescale (now NXP) processors. NXP buying Freesacle wasn't so bad since we also have worked with NXP and have some assurance that they won't just dump the parts we've been using. Qualcom and/or Broadcom, now that makes me nervious. On the other hand, we also use a lot of TI parts. I'd be much happier with a TI buyout of NXP.  

WinterDawn
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chip industry is under consolidation, but ...
WinterDawn   11/13/2017 7:53:54 PM
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Chip industry is under consolidation as shown by this latest acqusition news. But another theme accompanying this industry, as always, is the innovation. Chip sector is one of the industries requiring the most innovations. Nvidia is an example showing a chip company who is doing real innovative job could not become an aquisition target. Besides issues such as share price, company culture, IP licesning business model, how the new company will innovate certainly plays more role in determining if such merge/acqusition will happen. Hock Tan so far could not come up an anwer addressing the audience. Until that happens the real battle will begin.  

realjjj
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...
realjjj   11/13/2017 10:20:11 PM
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Broadcom needs either bad news on the licensing side or a 10-20% higher offer.

The idea that they would dispose of the patent business is a bit out there. As is, that business is going to be at least half the income of the combined Qualcomm+NXP entity.

Ofc given the legal mess that part of the business is facing, it's impossible to value it before things settle, on way or another. If Qualcomm wins, 8B+ of revenue per year at at least 80% margins with practically no OPEX and you can even argue that it is worth 100 billion on its own If Qualcomm loses, how bad is the loss, will that business shrink by 50% or 90% and how does 5G impact it, will revenue keep shrinking or can it grow. And if that wasn't enough, if they lose, Qualcomm would have to return some of the past payments and that could amount to tens of billions. That puts the valuation of the patent business anywhere between, let's say a negative 20 billion to a positive 100 billion. That's a huge problem for Broadcom ,in trying to extract the most value and quite an issue for any potential buyer.

Some are speculating that more of Qualcomm's customers are about to revolt, starting with Samsung and Huawei since they have plenty of their own patents- Huawei might have done it already. That would help Broadcom here but not sure it creates sufficient panic. If the EU makes some kind of move, that could be enough.

Spinning it off would be maybe the least risk, let the market value it but they would lose leverage in mobile.

sw guy
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Re: ...
sw guy   11/14/2017 4:54:07 AM
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Would Samsung and Huawei prefer to face Broadcom instead of Qualcomm ?I really do not know

realjjj
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Re: ...
realjjj   11/14/2017 10:48:51 AM
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Not sure either. From their perspective, patents aside, Qualcomm is both a supplier and a competitor so their calculations must go beyond just licensing. Opposing consolidation would be in their favor, unless they strike some kind of deal with Broadcom. In Samsung's case, they have the foundry business too and Broadcom would be a giant potential customer. Amusing that we  even consider such a merger as possible, shows how little faith we have in regulators.

resistion
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NXP is key
resistion   11/14/2017 5:22:54 AM
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Qualcomm going for NXP as life or death.

resistion
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AVGO market cap
resistion   11/14/2017 12:32:34 PM
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AVGO market cap not even 114 billion, they're not getting another bid.

photonic
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Re: ...
photonic   11/14/2017 2:54:42 PM
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Regulators have been on corporation's side during the last 60 years (or more) due to corporate lobbying. Congress also. One of the reasons leveraged buyouts work is because interest on corporate debt is tax deductable. Buyouts basically refinance (mortgage) the equity of a company. The company's management ends up with servicing the resulting increased interest payments. This results in a profit for the investors at the expense of long term real growth for the company.

Susan Rambo
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Interesting
Susan Rambo   11/20/2017 5:50:33 PM
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Interesting blog.

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