- A potential $70/share bid for Qualcomm (QCOM +12.7%) from Broadcom (AVGO +5.5%) feels a "little low," Nomura says, looking more toward a 50% premium typical to major deals in the sector.
- As far as Qualcomm's bid for NXP Semiconductors (NXPI -2.1%), there's a scenario where Broadcom buys both companies, sets a licensing deal with Apple (NASDAQ:AAPL), then spins off noncore operations that could help fund the deals, Nomura's Romit Shah says.
- The deal "makes sense for a bunch of different reasons," including scale, high accretion to EPS and that it's a very strategic deal with both companies' presence in smartphones, Shah tells Bloomberg Television.
- Cavium (CAVM +3.4%) and AMD (AMD +2.5%) could benefit from such a merger, BofA Merrill Lynch says, while the implications are more mixed for Intel (INTC -1.6%), Skyworks (SWKS +1.3%), Qorvo (QRVO -0.6%) and Xilinx (XLNX +0.4%). Intel could face more competition in mobile processing but the pricing environment could improve.
- At SunTrust, analyst William Stein and team say Broadcom's "tactic is sensible, strategy somewhat less clear to us."
- The deal fits with Broadcom's longstanding approach to take over leading franchises, they write, but: "Since we began covering AVGO, one major investor concern has been the company's exposure to the volatile handset market (~30% of sales). As QCOM has ~90% of sales from the handset market, it would take the combined company's exposure to ~65% of sales, potentially challenging our view that AVGO deserves an expanded P/E."
- Now read: AMD: Let's Do The Math
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