Broadcom offered $70 per share in November to buy mobile chip giant Qualcomm, but concerns that the price wasn’t high enough to appeal to shareholders left the deal in doubt and the stock trading around $66 to $67. So on Monday, when Broadcom upped its offer to $82 a share, a lofty level that Qualcomm has only reached in three days out of its entire 26-year history as a public company, investors surely would be more interested? Maybe not.
Despite the 17% higher bid to near unprecedented territory for the stock, Qualcomm’s stock price dropped more than 2% on Monday morning to $64.55. UPDATE: After the entire stock market plunged on Monday afternoon, Qualcomm finished the day down nearly 7% at $61.73.
Several issues appeared to be clouding the bid. One was a report from Nomura analyst Romit Shah, who said Apple aapl is planning to drop chips from both Qualcomm and Broadcom in this year’s next round of iPhone new models. “Qualcomm’s modem technology is solid, but Intel modems cost less while still meeting Apple’s standards,” Shah wrote. Apple will also drop Broadcom chips for wireless receivers and wireless charging, the analyst said.
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But investors may also be concerned that Broadcom said it would walk away from the deal if Qualcomm doesn’t agree to merge soon or if shareholders don’t elect Broadcom’s slate of nominees to Qualcomm’s board. Even with the $82 price, Qualcomm management is likely to continue fighting against the deal, analysts said.
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“We will withdraw this proposal and cease our pursuit of Qualcomm immediately following your upcoming annual meeting unless we have entered into a definitive agreement or the Broadcom-nominated slate is elected,” Broadcom CEO Hock Tan said in a letter to Qualcomm’s board on Monday.
Qualcomm confirmed that it had received the higher offer but said it would not comment until it had reviewed the materials with its advisors.
The price probably isn’t high enough to convince Qualcomm, Bernstein Research analyst Stacy Rasgon wrote on Monday. “The ‘best and final’ nature of the deal may be viewed as increasing the chance AVGO could walk,” Rasgon wrote. “We suspect the price is still below what QCOM is looking for; at a minimum by the metrics they outlined a few weeks ago they would likely still consider an $82 bid as undervaluing them.”
Finally, along with its higher bid, Broadcom avgo delivered a 40-page presentation detailing just how inept Qualcomm’s qcom management has been in recent years. In the past five years before Broadcom’s November 3 offer, Qualcomm’s stock has gained only 8%, worse than 91% of the companies in the S&P 500 index and far behind the 664% gain in Broadcom stock over the same period. Qualcomm’s revenue, gross profit, earnings before taxes, and net income all shrank over the past three years while growing on average at peer companies, Broadcom noted.