Qualcomm (NASDAQ: QCOM) is stuck in a bit of a "love" triangle. Broadcom (NASDAQ: AVGO) wants to buy it. Its own NXP Semiconductor is not assured. Yet Qualcom’s stock pays a solid 3.7% dividend yield and the stock is undervalued compared to other chip stocks.
Broadcom’s bid for QCOM stock is well-above the share price but the market is not reacting to them. Although QCOM’s stock fell when Broadcom lowered its bid to $79, chances are very low that Broadcom will get Qualcom. The combined firm, which includes NXPI, is just too big for regulators to approve. Broadcom’s bid is also questionable because it does not appear to be done in good faith. Broadcom’s management is not getting along with Qualcomm’s, which signals a deal is next to impossible at almost any price.
With all the uncertainties circling Qualcomm, antitrust fines and rulings against the smartphone chip supplier are disconcerting. The company could see its royalty rates hurt if courts rule against Qualcomm. Apple (NASDAQ: AAPL), which owes billions in royalties but refuses to pay, could win the lower royalty rates it demands.
Until the courts issue a final decision for or against Qualcomm, expect the stock stuck in a range. Holding the stock is neither profitable nor money-losing. It is a waiting game.
