Technology investors will remember November 7 as a big day for both Broadcom (NASDAQ: AVGO) and Qualcomm (NASDAQ: QCOM). The former bid for Qualcomm for $70 a share or $130 billion in cash and stock. Even though QCOM stock is not trading at $70 a share, investors think it can get more.
Broadcom is offering $60 in cash and $10 in stock for Qualcomm and is taking advantage of the latest headwinds the latter company faces. Legal woes from Apple (AAPL) raise uncertainties over the past, current and future royalty rates for Qualcomm’s technology. As the Snapdragon 835 series rolls out worldwide in the latest phones, Apple is getting left out. But Apple is betting it can squeeze better rates.
With Broadcom as the new owner of both Qualcomm and NXP Semiconductor, the giant company may flex its muscles. It could put an end to a push for lower royalty rates phone makers seek.
Given QCOM stock is inexpensive at $64.50, expect the stock potentially trading above $70 a share as it realizes Broadcom is willing to pay more to satisfy QCOM stock holders.
