Prominent Apple supplier and component maker Broadcom is considering an acquisition of fellow chipmaker Qualcomm for more than $100 billion, in what would be the largest-ever acquisition in the chip business. The news, reported by Bloomberg today, would value Qualcomm shares at around $70, and investors immediately responded enthusiastically by sending Qualcomm stock up nearly 14 percent in what Bloomberg says is the largest stock movement for the company in nearly a decade.
Why are stockholders happy? Well, Qualcomm happens to be in the middle of an ongoing existential crisis perpetuated by a legal showdown with Apple, which has long been a Qualcomm buyer for wireless modems that enable the iPhone to communicate with telecom networks. Qualcomm’s stock is down 16 percent this year, excluding the jump prompted by the Broadcom news today, and it suffered a staggering 90 percent drop in profit in its fourth quarter earnings released earlier this week. Qualcomm wrote at the time that its earnings were “negatively impacted as a result of actions taken by Apple and its contract manufactures.”
Apple currently uses both Intel and Qualcomm modem components, but the iPhone maker is now in a dragged-out legal fight over Qualcomm patents and the fees demanded to license the technology of those patents. Some of the patents are not for technology related to Qualcomm chips, but to underlying smartphone tech like power management and display features like Force Touch. Qualcomm, in suing Apple, says it is not obligated to license those like to does with industry standard technology. Apple, in suing Qualcomm, thinks the company is nonetheless overcharging for use industry standard patents, which the law requires be licensed out on fair, reasonable, and non-discriminatory (or “FRAND”) terms.