Broadcom withdraws Qualcomm offer after Trump rejects deal

US President Donald Trump

US President Donald Trump has blocked a planned takeover of chipmaker Qualcomm by Singapore-based rival Broadcom on grounds of national security.

Concern over China's potential influence, and rising United States protectionist sentiment, hung over the Singaporean firm's hostile takeover bid. The move announced Tuesday, Feb. 20, 208, comes as Qualcomm itself is in the crosshairs of Broadcom Ltd., which earlier this month raised its own cash and stock bid for Qualcomm to $121 billion.

Qualcomm and Broadcom did not immediately respond to requests for comment Monday night.

Bringing Broadcom and Qualcomm together would have been the technology industry's largest ever deal.

CFIUS, however, determined that a buyout would reduce Qualcomm's competitive edge and potentially give China an unacceptable level of influence in next-generation technologies, such as 5G networking.

Broadcom issued a statement saying it is reviewing the order and it "strongly disagrees" that its proposed acquisition of Qualcomm raises any national security concerns.

Technalysis Research president Bob O'Donnell said Broadcom has gained a reputation as a cost-cutter while Qualcomm - which makes most of the world's microprocessors for smartphones - has been focused on innovating.

Also, The Committee on Foreign Investment in the United States, which reviews the national security implications of foreign investments in US companies, had cited concern that Broadcom has a penchant for cutting costs, which might lead to Qualcomm being less of an industry leader.

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CFIUS noted that a Broadcom-Qualcomm merger could weaken Qualcomm's leadership in the field.

CFIUS, which raised concerns about the Qualcomm deal with Trump, listed the highly leveraged nature of Broadcom's bid for its larger rival as a major concern coupled with the risk of the US losing mobile technology leadership.

What do you think about the decision from the White House and Broadcom's subsequent dropping of their acquisition attempt of Qualcomm?

According to Bloomberg, Broadcom's effort to win six seats on Qualcomm's 11-member board of directors had significant support from Qualcomm shareholders in early balloting.

Born in 2005 following the private equity acquisition of what was Agilent's Semiconductor Products Group, Avago bought Broadcom in 2016 and assumed that company's name.

Broadcom breached the order and took steps to hurry the move to the U.S. without notifying the government, a senior official said in a Sunday letter from the U.S. Department of the Treasury, which manages the CFIUS process.

Broadcom said earlier this year it would fully be a US domiciled company by May 6.

He added that the government is not trying to "make any other statement about Broadcom or its employees, including its thousands of hard working and highly skilled U.S. employees".

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