Now that Broadcom has a $103 billion unsolicited bid on the table for fellow chip maker Qualcomm, the word from four people familiar with Qualcomm's thinking is that the San Diego based provider of Snapdragon mobile chips is going to turn down the deal.
Any merger deal would need to pass muster with Qualcomm shareholders and could face regulatory scrutiny in the United States and other markets.
"It is the board's unanimous belief that Broadcom's proposal significantly undervalues Qualcomm relative to the company's leadership position in mobile technology and our future growth prospects", Qualcomm executive chairman Paul Jacobs said.
However, Qualcomm needs to decide if it's open to accept Broadcom's offer.
For now, Qualcomm's board is sticking with its management team, led by Chief Executive Officer Steve Mollenkopf.
"We are confident in our ability to create significant additional value for our stockholders as we continue our growth in these attractive segments and lead the transition to 5G", he said, referring to the fifth generation wireless networks in the works. In fact, if the deal goes ahead it would probably the biggest in the technology industry's history, worth more than Dell's purchase of EMC in 2015, which was valued at $67 billion. "We would not make this offer if we were not confident that our common global customers would embrace the proposed combination".
However, Qualcomm is likely to dig in for a lengthy siege. Acquiring Qualcomm is further complicated by his target's own push to close a more than $40 billion purchase of NXP Semiconductors NV. Qualcomm does not plan to significantly raise its price for NXP as a defensive strategy to make its acquisition by Broadcom more expensive, according to one of the sources.
"After a comprehensive review, conducted in consultation with our financial and legal advisers, the board has concluded that Broadcom's proposal dramatically undervalues Qualcomm and comes with significant regulatory uncertainty", Tom Horton, the company's presiding director, said in the statement. Apple could weigh in on Broadcom's bid, analysts said, and might prefer that Qualcomm remain independent.
Importantly, Broadcom didn't immediately up its bid for the competitor, and it isn't at all clear that Qualcomm is interested in satisfying Tan's "strong preference" of engaging cooperatively. That would allow Qualcomm shareholders to vote to replace the company's board and force it to engage with Broadcom.