Published in News

Trump blocks Broadcom takeover of Qualcomm

by on13 March 2018

Nope, we didn't see that one coming

President Donald (Prince of Orange) Trump has blocked any moves for Broadcom to take over Qualcomm by issuing a presidential order.

Trump's ruling  is primarily because Broadcom is now based in Singapore, even though the company had promised to return its HQ to the US by the time of the Qualcomm shareholder meeting where it was expected to try to take its hostile takeover. Broadcom moved to Singapore to save money on US taxes.

The Tame Apple Press is furious because Apple wanted the deal to happen so that it would not have to pay so much to Qualcomm for its licensing. 

The tone of the reports of this story by TAPs shows Apple's anger at Trump.  Reuters said that Trump was acting on the advice of a "secretive panel" over the tie-up’s threat to US national security. "The decision was unveiled just hours after Hock Tan, the chief executive officer of Singapore-based Broadcom, met with officials at the Pentagon in a last-ditch effort to salvage what would have been the biggest technology deal in history", it moaned.

In this case, though the secretive committee was the Committee on Foreign Investment (CFIUS) in the US, which reviews acquisitions of American firms by foreign investors.

"There is credible evidence that leads me to believe that Broadcom Ltd.," by acquiring Qualcomm, "might take action that threatens to impair the national security of the United States", Trump said in the order released Monday evening in Washington.

Trump is getting concerned about foreign takeovers of US technology firms. In September, he blocked the sale of Lattice Semiconductor to a Chinese-backed investor. That was just the fourth time in a quarter of a century that a US president stopped a foreign takeover of an American firm on national security grounds. At least a half dozen technology deals have collapsed during the Trump administration in the face of CFIUS concerns.

Broadcom said in a statement it was reviewing the order and that it "strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns". Qualcomm didn’t respond to requests for comment.

On Monday, BRCM's CEO Tan went to the Pentagon to meet with CFIUS officials in a bid to address their concerns. Tan argued that combining Broadcom and Qualcomm would further US interests by advancing the development of the next generation of wireless technology known as 5G, according to a person familiar with the meeting.

CFIUS was not buying that, nor did it like the idea that Broadcom thought it could just move back to the US and set up shop.

"In the absence of information that changes CFIUS’s assessment of the national security risks posed by this transaction, CFIUS would consider taking further action, including but not limited to referring the transaction to the president for a decision", the Treasury said in the letter, which a much amused Qualcomm made public.

CFIUS was split on whether to weigh in. The Pentagon wanted the whole thing reviewed while the Treasury had pushed back wanting things to continue. Then the Treasury changed its mind and ordered  Qualcomm to postpone its shareholder vote by 30 days.  It had suddenly realised that Broadcom's takeover would threaten Qualcomm’s leadership in developing the next generation of wireless technology.

The government said it feared Broadcom would cut investment in research and development to increase short-term profits. That could allow Chinese companies, namely Huawei to become the dominant supplier, the US said.

It would appear that Broadcom's reputation of being an asset stripper might have counted against it. 

It is rare you will hear this, but Trump is right in this case.  It is far better for the technology industry that Qualcomm continues.  However, things are looking less good for Apple, which backed Broadcom because it thought it could cut a deal with the company and not have to pay so much for Qualcomm technology. Now it is looking pretty silly.

Last modified on 13 March 2018
Rate this item
(0 votes)

Read more about: