Much of Qualcomm Inc.'s (QCOM) recent quarter has been dominated by what has turned into a hostile takeover attempt by competitor Broadcom Ltd. (AVGO). As the semiconductor and telecommunications equipment manufacturer gears up to post its most recent fiscal first quarter earnings results this week, one team of analysts on the Street expects Broadcom to lift its bid price. (See also: Qualcomm: Stifel Downgrades, Despite Broadcom.)
Irvine, Calif.-based Broadcom's initial $105 billion bid for Qualcomm, comprised of a mix of cash and stock for $70 per QCOM share, was rejected by the company's board of directors as too low.
On Tuesday, RBC Capital Markets's analyst Amit Daryanani wrote a note to clients indicating that he sees "increasing probability that AVGO will submit a higher offer," particularly ahead of Qualcomm's shareholder meeting on March 6. Shares of Qualcomm traded down about 0.5% on Tuesday, closing at $66.99 and reflecting a market capitalization of approximately $99.2 billion. In December, Broadcom mailed out proxy letters to shareholders of Qualcomm, urging them to replace the entire board with Broadcom's candidates.
Daryanani expects Qualcomm to "spend time convincing shareholders during their EPS call and beyond on their ability to achieve $6.00+ EPS (noted potential for $6.75-7.50 post [Apple Inc. (AAPL)] resolution) and execute on cost take out initiatives." He also suggested that the firm will speak to progress regarding the close of its NXP Semiconductors NV (NXPI) deal, cleared by the European Union and South Korea yet still facing regulatory hurdles in China.
Qualcomm is slated to report its Q1 report after the closing bell on Wednesday. Along with acquisition talk, investors should expect to hear about the firm's ongoing litigation with tech giant Apple Inc. Last week, the EU fined the chipmaker $1.23 billion after finding the company guilty of making illegal payments to the Silicon Valley titan to use its technology exclusively in smartphones. (See also: Broadcom Price Targets Hiked After Brocade Deal.)