Wednesday, March 14, 2018

Notations From the Grid (Special Weekly Edition): On the Looming Tech Battles

We have been following the true "Soap Opera" with Qualcomm and Broadcom--Broadcom is building a major HQ here in Irvine, California in anticipation of its' move back to the United States.

It was interesting and timelyl as our team reviewed this "snapshot" courtesy of Robert Hackett at Fortune on the status that is a  worthwhile read as the Chip Battle continues in the Tech Space--and as the big player, Intel, waits in the wings: 

MARCH 10, 2018
Good morning, Cyber Saturday readers.
What’s happening in the chip industry is more sensational than a soap opera.
This week the U.S. Treasury asked Qualcomm to postpone by 30 days an annual shareholder meeting that could have resulted in the company’s hostile takeover by Broadcom, a Singapore-based rival. The Committee on Foreign Investment in the United States is now investigating whether Broadcom’s $117 billion conquest attempt could have national security consequences, given Qualcomm’s sensitive government work and the role it plays in developing technology behind next-generation 5G telecom infrastructure. Should the U.S. allow a foreign force to snap up a domestic concern so seemingly vital to its future?
The situation gets more complicated. The U.S. committee is less concerned about the firms’ geographies and more about their investment strategies. (Broadcom, formerly headquartered in the U.S., is already seeking to repatriate.) The big issue for the committee is Broadcom’s “private equity”-style approach to management which, the regulatory body said in a letter, could mean reduced R&D investments in favor of “short term profitability.” Broadcom has attempted to assuage concerns by promising to fund innovation.
Broadcom’s case is not helped, however, by its LBO-like raiding tactics. The firm, which has vied for months to consummate its proposed deal, is leading an effort to replace six members of Qualcomm’s 11-person board of directors—a move that, if successful, may as well seal the tie-up. They are, one could argue, acting like barbarians at the logic gate.
Qualcomm’s management team, meanwhile, prefers to maintain its independence and pursue a $44 billion purchase of NXP Semiconductors, a Dutch chipmaker. And Intel, the big chip kahuna, isn’t sitting idly by either. Threatened by the prospect of a combined Broad-Qual, the company is said to be waiting in the wings, ready to swoop in and make a bid for Broadcom if the Qualcomm coup looks likely to succeed. This is the stuff that corporate sagas are made of.
The subtext of all this is the U.S.’s fear of ceding power to China. The deal-reviewing committee has warned that foreign titans like Huawei and ZTE Corp. are poised to take the lead in 5G unless the U.S. takes steps to defend its silicon might. What may seem like arcane corporate infighting has the gravest implications for the nation’s fortunes.
Tune in next time for more melodrama. Till then, relax and have a great weekend.
Robert Hackett

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