Report: Microsoft and Google Concerned that a Broadcom Acquisition of Qualcomm Would Stifle Innovation
By now, we are well-familiar with Broadcom’s proposed acquisition of Qualcomm. Broadcom proposed an unsolicited $105 billion acquisition bid of Qualcomm last month, but Qualcomm rejected it on account of the bid “significantly undervaluing the company.” News then emerged that Qualcomm wanted Broadcom to raise its bid by $10 a share. Then, in a significant escalation, Broadcom nominated a new slate of board of directors for Qualcomm—the first step in a potential hostile takeover of Qualcomm. Qualcomm responded by calling it a “blatant attempt to seize control of the […] board in order to advance Broadcom’s acquisition agenda.”
The ultimate fate of the deal could have far-reaching implications for the tech industry, and now, a CNBC report states that Microsoft and Google are among companies that have expressed private concerns to Qualcomm about a takeover of the company by Broadcom. According to the CNBC report, the companies are said to be wary of Apple’s potential influence over a deal. It also noted that regulators tend to ask for input from key players in an industry before making a judgment on whether or not to approve a deal.
CNBC report continued by stating that according to its sources, Qualcomm has told Microsoft, Google, and other companies not to make any public statements opposing a deal. This is because the U.S.-based chip maker wants to see if Broadcom will significantly increase its $70-per-share offer before standing up firmly against a possible deal.
The report added that a Broadcom takeover of Qualcomm may improve Apple’s relationship with Qualcomm. We have previously seen reports that Broadcom’s Chief Executive has said that in the event of having acquired Qualcomm, the patent disputes with Apple could be solved. Qualcomm provides modem chips used in Apple’s mobile devices, and the chip maker is involved in multiple lawsuits with Apple—the latest being a countersuit filed by Apple against Qualcomm for patent infringement.
One possible result of the litigation could result in Apple abandoning Qualcomm for future products, according to the report. However, it continued by stating that Broadcom Chief Executive Hock Tan has privately expressed optimism about an ongoing litigation settlement with Apple in the event of Broadcom acquiring Qualcomm.
So why are Microsoft and Google said to be have expressed concerns to Qualcomm about a possible acquisition by Broadcom? It’s simple: Microsoft and Google are Apple’s competitors. If Apple gains by settling its ongoing litigation with Qualcomm and gaining a stronger position in the industry, both Microsoft and Google could be adversely affected.
Google also has another reason for being concerned about a possible deal. Most Android smartphones use Qualcomm Snapdragon processors, from the Snapdragon 800 series in flagship smartphones down to the Snapdragon 200 series in entry-level smartphones. If Broadcom cuts costs instead of continuing R&D and trying to innovate on mobile processors, there will be a negative impact on Android phones—leading to a negative impact on Google.
Microsoft’s reason for being involved is because of its collaboration with Qualcomm. Qualcomm this week launched Always Connected PCs built using Windows on ARM. Windows on ARM is a collaboration by Microsoft and Qualcomm to make the full version of Windows (along with Win32 apps via emulation) run on Snapdragon processors. The first Snapdragon 835 laptops will soon be released in the market.
CNBC notes that despite being two of the largest companies in the world, Microsoft and Google can’t rival Apple or Samsung in terms of sales volume from either Qualcomm or Broadcom (as Microsoft and Google aren’t companies primarily dealing in hardware). According to the report, both Microsoft and Google are said to “perceive an independent Qualcomm as being more closely aligned with their interests than a Broadcom-owned Qualcomm that is [closer to] Apple.” It added that both companies have also privately expressed concerns with Mr. Tan’s reputation of cutting costs at the expense of increasing spending on innovation.
Finally, the report states that complaints about Broadcom’s proposed deal from third-parties like Microsoft and Google may result in the deal’s failure. This is because Mr. Tan noted that Broadcom, acquired by Avago in 2014, would not have made this offer if it was not confident that the company’s “common global customers would [accept] the proposed combination.” It seems that the Broadcom-Qualcomm acquisition saga isn’t going to end anytime soon, so we will have to wait and see how it goes.