This Qualcomm Debacle Would Look Awful If It Happened In the Third World

Many who follow financial news have been aware that Qualcomm has been battling against a hostile takeover by Broadcom since last fall. Qualcomm is the wireless technology company whose stock seemed to multiply weekly in 1999, but has been poorly managed since the tech bubble, and trades at a dramatic discount to its peers. Its licensing issues with Apple created what Broadcom viewed as an opportunity to launch a proxy fight to acquire the company. Last week, Qualcomm appeared to be warming to the idea of an acquisition, even asking Broadcom to engage in valuation discussions (Broadcom lowered its bid from $82 to $79 after Qualcomm had just the week before completed its acquisition of NXP Semiconductors at a premium).

Shareholders too – or any with a pulse – had warmed to the Broadcom offer, in spite of the lowering of the price. Qualcomm has been so poorly run that the opportunity to exit in a cash and stock acquisition is attractive, no matter what Qualcomm’s current management now says it can do over the coming years as a standalone company.

The day before the Qualcomm shareholders’ meeting that was bound to displace the current board in favor of Broadcom’s board, the Treasury Department intervened and delayed the meeting in order to allow the U.S. Committee of Foreign Investment (CFIUS) to investigate whether the acquisition puts the US at a disadvantage versus China in 5G. (Broadcom was a US company before moving to Singapore in 2015 for tax purposes and is in the process or repatriating its headquarters).

No doubt, in a global world, technology is important, and it is important that the U.S. maintains a roll as a world leader in telecom technology. The actions of Qualcomm’s board in secretly involving the government to help it fend off an acquisition that to its shareholders sounds like an action one would expect in a Third World country.

More unconscionable is the fact that the Treasury Department is engaged at this point (prior to a shareholders’ vote on management and while Broadcom is in the process of repatriating). It seems clear that Steven Mnuchin will now make a decision as to Qualcomm’s fate based on who sucks harder and that isn’t the way that a fair and functioning economy should operate.