Qualcomm-Broadcom Reality

Qualcomm is a U.S. company being purchased by a foreign company, Broadcom.  That is where the Committee on Foreign Investment in the US (CFIUS) comes in.  By all indications, Broadcom has  already received requests for information from CFIUS before we knew CFIUS was involved.  There is not much new in that.  CFIUS tends to keep things close until a vote is taken, just to keep political maneuvering from trying to influence a decision.  The US government has asked Qualcomm to delay its annual shareholder’s meeting for 30 days while the case is considered.  Qualcomm was set to vote on six new Board members favored by Broadcom.  That would have made the job of a takeover much easier.

What the Wall Street Journal says here is really interesting from a technology leadership standpoint.  If the purchase goes through, Qualcomm can be influenced in an area of great concern to future generations - 5G.  Regulators are concerned that Broadcom might cut R&D on 5G, leaving the field open for Huawei.  Huawei is not exactly CFIUS’ favorite company, having blocked most of its planned acquisitions in the US because it is linked to Chinese intelligence services.  There is a lot more going on there than just this, but that is enough to make this harder to do than even Broadcom thought it was going to be.

Complicating it further was Broadcom’s comments about moving its operations to the US.  That could, if they incorporated in the US, make CFIUS review impossible.  It just can’t happen soon enough to influence how this deal goes. Planning to move to the US doesn’t count in a CFIUS review.

There was also some speculation in these two Wall Street Journal articles that The US Treasury Department drug its feet on getting a CFIUS review.  Why? - would be a good question for Treasury.   The claim in these articles is that the deal had not gone through.  That is not a prerequisite, as the previous inquiries to Broadcom show.  The CEO at Broadcom had done his preparation well, meeting the the President the day before the deal was announced, with the speculation that Broadcom would move to the US.  That gave the President a big win by having a foreign company moving to our shores.  They have had a year for that to take shape, but we haven’t heard about a location search, incorporation plans, or any of the usual movements that go into getting the company settled in.  There is enough intrigue in this to make a movie, but the Huawei connection is the most of it.  The US has some reasons for not trusting Huawei that we don’t know about yet, and it would be really interesting to find out.