Broadcom Limited has gone hostile in its bid for Qualcomm Incorporated. Digital communications products maker Qualcomm turned down Broadcom’s initial proposal, and the suitor has now proposed its own slate of 11 directors to replace the current Qualcomm board. It could be a long battle, as Qualcomm’s 2018 annual shareholder meeting will not be held until March 6.
Qualcomm is the top holding of the iShares PHLX Semiconductor ETF, accounting for 8.96% of the fund’s portfolio. Broadcom, which supplies a wide range of semiconductors for many global applications, is also within the top five components – together, the two companies make up 16.5% of the fund’s holdings. Intel Corporation, at 8.93%, is currently the ETF’s second largest holding.
The Philadelphia Semiconductor Index (SOX) opened Thursday at 1,227.74, up 34.3% year to date and solidly in bull market territory at 49.9% above is post-election low of 812.33 set on Nov. 10, 2016. The SOX is an economic indicator, as almost every product we buy contains computer chips, from our motor vehicles to our hand-held devices. The SOX set its all-time high of 1,342.05 on Nov. 24 and is down 9.3% since then, which is an early sign of economic weakness. (See also: SOX Semiconductor Index at 17-Year Resistance.)
Broadcom shares opened Thursday at $275.70, up 56% year to date and in bull market territory at 71.6% above the post-election low of $160.62 set on Dec. 2, 2016. The stock is down just 3.5% since its all-time intraday high of $285.68 set on Nov. 27. Meanwhile, Qualcomm opened Thursday at $65.40, up just 0.3% year to date and in bull market territory at 33.7% above its post-election low of $48.92 set on Sept. 8. The stock is down 6.9% since its all-time intraday high of $70.24 set on Dec. 13, 2016.
Shares of Broadcom opened higher on Thursday after the company beat earnings estimates when it reported results after the closing bell on Wednesday. The stock traded as high as $280.64 in pre-market trading this morning on strong wireless chip demand.
Broadcom is not cheap, with a P/E ratio of 206.01, and it wants to buy Qualcomm, with its reasonable P/E of 25.09 and a dividend. …read more
Read more here: Broadcom Stock Pops on Earnings, but No New High
Category: AVGO, QCOM, SOXX, INTC