Qualcomm shares closed lower in the US Monday, as an order from US President Trump sought to end takeover negotiations with Singapore-based Broadcom. Trump’s decision was based on a perceived threat to national security if the deal were to go ahead.
Qualcomm shares ended down 0.35% at $62.81, while Broadcom shares closed 3.57% higher at $262.84.
US national security threat
After months of discussions, Trump moved to end the potential deal. In an executive order, the US president prohibited the takeover of Qualcomm Inc. by Broadcom Ltd.
“There is credible evidence that leads me to believe that Broadcom Limited,… might take action that threatens to impair the national security of the United States,” Trump’s order read.
And, as well as prohibiting the takeover, the President also stated that all Broadcom board members are “disqualified from standing for election as directors of Qualcomm”.
The order also added that: “The Attorney General is authorized to take any steps necessary to enforce this order.”
Both Qualcomm and Broadcom acknowledged the order. However, Broadcom said it would review it.
“Broadcom is reviewing the Order. Broadcom strongly disagrees that its proposed acquisition of Qualcomm raises any national security concerns,” the Singapore-based tech firm said in a statement.
Future tech fears
While the wording of Trump’s order makes it clear he is unhappy with the potential deal, it’s also been reported that the problem is Broadcom’s relationships with third-party, foreign businesses, such as Huawei.
Specifically, according to a Reuters report, its thought that if Broadcom were to successfully buy Qualcomm, in a few years, there would be one dominant telecoms leader – likely Huawei - from whom the US military would be forced to purchase their goods from.
In addition, there are fears the Singapore-based chipmaker could limit the US-based telecoms equipment manufacturer’s research investment levels. This in turn could lead to Qualcomm losing its place as a significant competitor to major player, Huawei.