The cat-and-mouse game between Broadcom and Qualcomm has come to a sudden halt after President Donald Trump today threw a spanner in the works. As you may recall, over the past couple of weeks, Broadcom has been attempting to take over Qualcomm, with the latter trying its best to thwart these efforts. The deal even came under the scanner of the Committee on Foreign Investment in the United States.
However, what would have been the largest deal in the tech arena if completed has now been blocked by Trump “on grounds of national security.”
The president, who has always been vocal about protecting American companies and jobs, stated that Singapore-based Broadcom’s takeover of Qualcomm was not in the best interests of the United States.
The government also disqualified 15 people, who were proposed by Broadcom to run for election to Qualcomm’s board of directors, from participating in the process.
This action underscores the current administration’s focus on protecting American companies from foreign competitors. The government raised concerns that allowing an American technology company to be acquired by a foreign entity would harm its strong position in the wireless industry.
Qualcomm, a key player in the technology industry, has an important role to play in the development of 5G wireless technology in the US, and the government is reluctant to part ways with it. The government also disqualified 15 people, who were proposed by Broadcom to run for election to Qualcomm’s board of directors, from participating in the process.
Broadcom, on its part, has tried everything possible to secure a deal with Qualcomm. The company had promised to relocate its headquarters to the US and also assured that it would maintain a strong focus on 5G research and development in the event of a merger. However, these promises failed to convince the government.
The intervention in the Broadcom case is said to be unusual and is likely to set a precedent where other deals could be blocked citing national security reasons.
Trump has also made it clear that he is not very fond of China either. His recent decision to impose high tariffs on steel and aluminum imports was targeted against Chinese steel, which he claimed was hurting manufacturing in the US. This action too, like the blocking of the Qualcomm deal, was taken for “reasons related to national security.”
Chinese firm Huawei is being singled out as the main culprit behind the blocking of the Broadcom-Qualcomm deal. Although the corporation has no direct hand in this decision, the company’s unexplained ties to Beijing and its rapid progress in 5G technology is said to be ruffling feathers. Even though Broadcom is a Singaporean company, there were concerns that once it took over Qualcomm, it would reduce Qualcomm’s 5G investment and slow its progress, thus allowing Huawei to gain pace.
China has been investing heavily in its technology sector and Trump believes it is imperative for the US to take appropriate measures to maintain its footing without giving control to foreign entities.
However, the intervention in the Broadcom case is said to be unusual and is likely to set a precedent where other deals could be blocked citing national security reasons. Some sources say the US might have actually benefited from some Singaporean technology, had the deal happened.
For now, however, it seems Trump has played his final card.
Broadcom Limited (NASDAQ: AVGO) reported first quarter 2021 earnings results today. Total revenue increased 14% year-over-year to $6.65 billion. GAAP net income was $1.3 billion, or $3.05 per share, compared
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