Qualcomm Inc said its board will convene to discuss the next steps on Broadcom Ltd’s $121 billion acquisition offer after a meeting with its hostile suitor on Wednesday, giving no indication of whether the two chipmakers are closer to agreeing on the largest deal in the history of technology.
“We met with representatives of Broadcom for two hours earlier today, and listened carefully to what they had to say,” Qualcomm said in a statement after the meeting in New York. “The Qualcomm board will promptly meet to discuss the meeting and to determine next steps.” While Qualcomm’s representatives listened, they didn’t engage with their counterparts, according to a person familiar with Broadcom’s view of how the meeting went.
Last week, Qualcomm’s board rejected Broadcom’s ‘best and final’ proposal of $82 a share, which San Diego-based Qualcomm has dismissed as too low. The company had agreed to meet with Broadcom Chief Executive Officer Hock Tan, but warned that he would need to offer more and give better assurances that a transaction would get regulatory approval in a reasonable time frame. Tan replied that the newest bid was as high as he was going to go. The two sides face a showdown at a March 6 shareholder meeting, where Broadcom is asking Qualcomm investors to elect its board nominees in order to force the deal through.
A failure to win over either Qualcomm’s board or shareholders would be a rare setback for Tan. He’s already made Broadcom into one of the largest companies in the $380 billion semiconductor industry through a string of deals. Taking control of Qualcomm, the biggest maker of chips that power smartphones, would give his company an unprecedented reach in the components that run modern communications systems.
Qualcomm’s board includes Chairman Paul Jacobs – the son of the company’s founder – and CEO Steve Mollenkopf, who are both engineers committed to taking market-leading mobile chip technology into new areas such as servers, personal computers and automobiles. Tan has dismissed such expansion plans as unrealistic, arguing that the industry has changed and slowed down.
At the meeting, Tan wasn’t given the chance to the appeal to the whole of Qualcomm’s board. The target company was represented by Tom Horton, Jacobs and Mollenkopf from the board, and three others from the leadership team. Only Horton is an independent; the rest are long-serving executives, or in Jacobs’s case a former executive, who are committed to Qualcomm’s current strategy and plan to remain a standalone company.
Still, Qualcomm’s contention that the chipmaker’s future is brighter on its own has been a tough sell over the past two years. Challenges to the lucrative technology-licensing business have been at the center of its problems. Regulators around the world are fining or investigating Qualcomm, supporting elements of Apple Inc’s claims in a lawsuit alleging Qualcomm abuses its dominant position in mobile chips. Qualcomm has countered that it expects to win in court over time and overturn some of the more than $4 billion it has been fined.