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The order says there is credible evidence that Broadcom, through exercising control of Qualcomm, “might take action that threatens to impair the national security of the United States.” It requires Broadcom and Qualcomm to “immediately and permanently abandon the proposed takeover.”
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.
Brent Iadarola, Frost & Sullivan’s vice president of mobile and wireless communications, tells Channel Partners the administration’s stance is distinctly based on national security sensitivities, so “I can’t envision any scenario where this transaction is brought to fruition while Trump is in office.”
“The case against the acquisition is inherently tied to the argument that the transaction could adversely impact U.S. control of the pace and progress of the development of 5G technologies,” he said. “Although Broadcom is based in Singapore, Chinese companies such as Huawei and ZTE have emerged as strong competitors in the race towards 5G. There is a real concern that the United States’ current competitive position in advancing next-generation networks such as 5G could be compromised with this acquisition.”
Brenon Daly, research director of financials for 451 Research, called the order an overreach and said by meddling in the market, “Trump is artificially skewing the competitive landscape.” That has consequences, “as surely as his decisions as a businessman resulted in the bankruptcy of several of his casinos and hotels,” he said.
“Trump has effectively given Qualcomm a new lease on life by blocking any changes that a new owner might have brought,” he said. “And frankly, despite its protestations and defensive posturing, Qualcomm needs some changes. The company has posted revenue declines for the past three consecutive fiscal years, and is forecast to shrink again this fiscal year. Meanwhile, Qualcomm’s business model – which Trump’s move has, in principle, perpetuated – has led to a protracted legal fight with its highest-profile customer and wireless market leader, Apple.”
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