Published: Thu, March 08, 2018
Industry | By Dora Warner

Broadcom dangles 5G promise to save Qualcomm deal

Broadcom dangles 5G promise to save Qualcomm deal

Instead, Broadcom has resorted to what is essentially a hostile takeover by putting forward a slate of six Broadcom nominees for Qualcomm's 11-member board.

The government's move though could now spoil Broadcom's efforts to take over the American company.

Broadcom's intentions came one day after the U.S. Treasury Department's Committee on Foreign Investment in the U.S. sent a letter to Broadcom questioning the company's ties to foreign organizations. That would move the voting back to April 4th.

The Committee on Foreign Investment in the United States has been reviewing the proposed merger by Broadcom.

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The US Treasury Department is anxious that Broadcom's plan to buy Qualcomm could pose a national security threat.

While the companies the letter cites as a security risk are not disclosed in the letter, they are nearly certainly Chinese and relate to Qualcomm's development of 5G mobile communications technologies. A source familiar with CFIUS says that if the deal goes through, there may be no other option for American carriers than to rely on Huawei.

Broadcom, which is facing CFIUS investigation related to its $117 billion bid for Qualcomm, announced a $1.5 billion innovation fund to educate engineers in the U.S. The panel has recently blocked several deals by Chinese buyers, including Ant Financial's proposed takeover of MoneyGram, a money-transfer company.

Based in Singapore, Broadcom - formerly known as Avago Technologies - has grown fast via a string of acquisitions, taking the name of one of its acquisitions in the process.

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On Wednesday, Broadcom said that if it acquires Qualcomm, the company is committed to making the United States "the global leader in 5G".

In terms of products, "Qualcomm now holds active sole source classified prime contracts" with the Department of Defense, it said.

Qualcomm also holds a number of government contracts, particularly classified and unclassified work for the Department of Defense, which the Treasury seeks to protect.

Some on Wall Street and in government have been vociferously against the proposal, partly because of the idea that Broadcom might cut Qualcomm jobs, but also because of the importance of the companies' products-chips for telecommunications equipment-in the upcoming wave of "5G" mobile broadband technology. Qualcomm's board has rejected the offer, and a few days ago it urged shareholders to reelect its members at the annual shareholder meeting that had been scheduled for March 6.

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