Qualcomm (QCOM) stock surged after it was reported that the chip maker has turned down Broadcom’s takeover offer. In a statement announcing that Qualcomm rejected Broadcom (AVGO), the company said the board decided that the bid “dramatically” undervalues it.
Qualcomm rejected Broadcom offer
Broadcom announced that it will work with Qualcomm’s management and board of directors. The company also said that major stockholders and customers gave positive feedback on its $103 billion bid for the maker of the Snapdragon line of processors. Broadcom said in a statement that it still believes its bid is “the most attractive, value-enhancing alternative available to Qualcomm stockholders.”
Broadcom entered its unsolicited bid for Qualcomm last week. Now that Qualcomm rejected Broadcom, the next step could be either a proxy battle or a higher bid. However, the statement highlighting how supportive shareholders were could suggest that Broadcom is leading in the direction of a proxy fight. In fact, Loop Capital analyst Betsy Van Hees told Reuters that she would be surprised if the company didn’t choose that route.
However, Qualcomm could try to convince shareholders that it can create more value for them separate from Broadcom, according to analyst Chris Caso of Raymond James.
What analysts have to say about Qualcomm and Broadcom
Some analysts have suggested that a tie-up between the two companies could help Qualcomm resolve its ongoing legal battle with Apple over royalties because Broadcom lists the iPhone maker among its customers as well. In fact, Broadcom’s relationship with Apple is even closer than Qualcomm’s, especially now. The chip maker was hugely unhappy when the iPhone maker started using Intel modems in some of its newer models, which sparked the legal battle. Now there are reports that Qualcomm could be out of the picture entirely for next year’s iPhone models.
