Broadcom dangles 5G promise to save Qualcomm deal

Glen Norman
March 8, 2018

At the meeting - previously scheduled for Tuesday - the San Diego company's shareholders are to vote on whether to hand control to Broadcom by putting Broadcom-backed candidates on Qualcomm's board of directors.

The inter-agency panel, which is chaired by the Treasury secretary, is also scrutinizing Broadcom's relationships with "third party foreign entities". Qualcomm said it received the letter on Sunday.

Broadcom's ongoing attempt to acquire Qualcomm, a deal that would be the largest tech merger in history, hit another roadblock this week when the USA government chose to intervene.

Broadcom notes that it is in the process of moving its official headquarters from Singapore to the U.S., in part to assuage any worries over national security threats.

Today (7 March), Broadcom issued a pledge to keep the United States at the forefront of emerging mobile technology like 5G if it were to acquire Qualcomm in an effort to dispel worries. The CFIUS letter noted that Broadcom has not elaborated on how it plans to change Qualcomm's licensing model, but appeared to side with Qualcomm's claim that its current model is needed to support R&D funding.

For more than three years, Qualcomm's stock has been weighed down while the stock market overall has soared.

Qualcomm also is a product supplier to the USA government and is working with it on cybersecurity for the next generation of wireless, 5G and the Internet of Things, according to the letter.

Broadcom said it is run by a board of directors and senior management team consisting nearly entirely of Americans.

In a statement, Broadcom said the Qualcomm takeover is aimed at increasing the company's focus on 5G cellular technologies.

The firm said it expects 5G to take off faster than 4G, hitting 2.6 billion connections by 2025, more than 20 percent of all mobile subscriptions. The debt Broadcom would need to finance the deal would increase pressure to earn short-term profits at the expense of spending on research and development, according to the letter. "Limitation or cessation of supply of Qualcomm products or services to the USA government could have a detrimental impact on national security".

Broadcom has started a new offensive in its effort to take over Qualcomm, promising to invest Dollars 1.5 billion to train engineers in the United States and make the country a leader in 5G technology.

Qualcomm's shares slipped 41 cents to $64.33, while Broadcom's were down $1.46 at $249.41.

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