Microsoft (MSFT) and Google (GOOGL) are among companies that have expressed private concerns to Qualcomm (QCOM) about a Broadcom (AVGO) takeover, according to people familiar with the matter. The companies are wary of Apple's potential influence over a deal, said the people, who asked not to be named because the discussions are private. They're also worried about Broadcom's reputation of cutting costs rather than investing in new technology, the people said. Qualcomm rejected a hostile $105 billion bid last month, leading to Broadcom nominating a new slate of board directors for the San Diego-based company earlier this week. Regulators frequently ask for industry input when making a judgment on whether or not to approve a deal. Qualcomm has said it has antitrust concerns about a potential Broadcom takeover. Qualcomm has told Microsoft, Google and other companies not to make any public statements opposing a deal, said the sources. Qualcomm wants to find out if Broadcom will significantly increase its $70-per-share offer before taking a firmer stance against a possible deal, said the people. A Broadcom transaction for Qualcomm may improve Apple's relationship with the chipmaker, which currently provides chips used in the iPhone and iPad. Qualcomm is suing Apple for patent infringement after Apple in January sued Qualcomm for roughly $1 billion , claiming Qualcomm charged royalties improperly. Qualcomm has issued and applied more than 130,000 patents covering, among other things, smartphone technology. The litigation could result in Apple abandoning Qualcomm for future products. But Broadcom Chief Executive Hock Tan has privately expressed optimism about settling an ongoing litigation with Apple if Broadcom were to acquire Qualcomm, according to a person familiar with the matter.
Why Microsoft and Google would object Apple's gain could be its competition's loss. In Google's case, many of the phone and tablet makers who build phones on its market-leading Android operating system use Qualcomm processors. Android and its derivatives make up 85 percent of the smartphone market, according to IDC. Microsoft just announced the first Windows 10 PCs using Qualcomm chips, and it may continue to push these types of tablet and hybrid PCs, which use less power than traditional Intel-based PCs, as it seeks to compete with Apple's iPad. While Microsoft and Google are two of the largest companies in the world, neither rival Apple or Samsung in terms of sales volume from either Qualcomm or Broadcom. Still, both Microsoft and Google perceive an independent Qualcomm as being more closely aligned with their interests than a Broadcom-owned Qualcomm that is tighter with Apple. The companies have also privately expressed concerns with Tan's reputation of cutting costs at the expense of increasing spending on innovation, two of the people said. Complaints from these third parties could play a role in scuppering the deal. In the press release announcing the proposed buyout, Tan said "We would not make this offer if we were not confident that our common global customers would embrace the proposed combination." Spokespeople for Qualcomm, Broadcom, and Google declined to comment. A spokesperson for Microsoft couldn't be reached for comment.
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