What would Hock Tan do with Qualcomm - and maybe even NXP - if the acquisition-prone CEO could gobble them both. Here are some thoughts.
I’m heading to Yosemite for a long weekend Saturday. When I return to San Jose there’s an outside chance the semiconductor landscape would not look the same.
The still-new Broadcom may strike a deal this weekend to acquire Qualcomm according to Reuters which cites three sources and the Wall Street Journal which cites one. There are plenty of good reasons why this may never happen, but for the sake of argument let’s say it does.
The first thing Hock Tan would do is put up for sale Qualcomm Technology Licensing, owner of the largest patent portfolio in wireless. That would help recoup some the estimated $100 billion costs of the deal and could effectively end a slew of patent infringement cases with Apple as well as antitrust actions around the planet.
Think different. Apple might even buy those Qualcomm patents, or some of them, as part of burying the hatchet. Hungry activist shareholders who have been pressuring Qualcomm to divest its patent business would declare a holiday.
The next step is obvious. Peace declared with Apple could mean the beginning of the end of the fledgling cellular modem business for Intel and Mediatek. Meanwhile Tan’s pride over Avago’s strength in RF front ends might require the sale of RF360, the Qualcomm/TDK joint venture.
Here my crystal ball gets foggy. Would Tan keep Qualcomm’s Snapdragon business?
When Tan acquired Broadcom within a month he cut $300 million and split the company into two dozen tiny parts, each with a P/L manager reporting directly to him. It’s all about closely monitored results.
When Tan acquired Broadcom many classic Broadcom senior engineering managers left. There was no oxygen for them in the tightly controlled environment of the new Broadcom.
Tan would have to ease up on his detailed level of control to give a broad Snapdragon and baseband unit room to operate. Separating the two products would seem absurd given they are the two highest value components in a smartphone.
And what about NXP? Frankly, I would not be surprised if Tan leaked a surprise bid for the troubled Qualcomm to disrupt its delayed bid for the embedded chip vendor with deep ties to the automotive sector.
NXP may be Tan’s real target. It’s wide variety of automotive, IoT and networking chips are a better fit for the new Broadcom. Its products could be sliced and diced and sprinkled across the new Broadcom’s many business units. Those that weren’t a clear fit or clear market leaders could be sold off. Classic Hock Tan.
“Broadcom had a chance to bid on NXP, and they were obviously outbid by Qualcomm,” said Linley Gwennap, principal of market watcher the Linley Group. “Maybe if Broadcom scared Qualcomm off, NXP might accept a lower price, but that’s unlikely since NXP is agitating for a higher price,” he added.
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