Broadcom pledges $1.5B innovation fund to reassure regulators

08 March, 2018, 02:11 | Author: Jason Torres
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Qualcomm shareholders were schedule to vote on Broadcom's nominees on Tuesday, but Qualcomm postponed its annual meeting until April 5 after the CFIUS said it wanted more time to evaluate Broadcom's takeover proposal. Some relate to Broadcom's relationships with third party foreign entities. Qualcomm said it received the letter on Sunday.

Broadcom also took a swipe at Qualcomm's licensing business, which is a subject of dispute between the companies.

Broadcom's CEO Hock Tan joined US President Donald Trump in the White House previous year to announce he was moving Broadcom's headquarters to the US from Singapore - a move that appeared created to appease US officials and facilitate future acquisitions.

Broadcom says it will earmark $1.5bn for funding of 5G wireless broadband networks as part of its proposed acquisition of Qualcomm.

Broadcom, which previously blasted Qualcomm for voluntarily seeking a CFIUS review, has nominated six alternative candidates to Qualcomm's 11 member board of directors in hopes of pushing forward its $117 acquisition. Much of the company's troubles stem from its patent licensing business, which has been in the cross-hairs of competition regulators and is at the center of an ongoing fierce legal battle with Apple over patent fees.

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In a letter explaining the grounds for investigation, Treasury cited Qualcomm's "unmatched expertise and research and development expenditure", which drives its ability to set standards for the next generation of wireless technology known as 5G.

The firm said it expects 5G to take off faster than 4G, hitting 2.6 billion connections by 2025, more than 20 percent of all mobile subscriptions. The US official who wrote the letter referenced worries about the potential for China to "compete robustly to fill any void left by Qualcomm as a result of this hostile takeover" and noted existing concerns around Chinese companies like Huawei.

Broadcom said it's cooperating with the review by CFIUS. The debt Broadcom would need to finance the deal would increase pressure to earn short-term profits at the expense of spending on research and development, according to the letter.

Broadcom, which makes chips for everything from set-top boxes to data centers, on Wednesday vowed to make the United States a global leader in 5G, a next-generation cellular technology that's poised to boost wireless speeds, coverage and the ability to handle an ever more diverse deployment of connected devices.

Qualcomm's shares dipped 3 percent in mid-day trading to $61.89.



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