{"id":51017,"date":"2017-11-07T06:18:10","date_gmt":"2017-11-07T06:18:10","guid":{"rendered":"https:\/\/www.biphoo.com\/bipnews\/?p=51017"},"modified":"2017-11-07T06:18:10","modified_gmt":"2017-11-07T06:18:10","slug":"a-tale-of-two-chip-stocks","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/technology\/innovation\/a-tale-of-two-chip-stocks.html","title":{"rendered":"A tale of two chip stocks"},"content":{"rendered":"

A tale of two chip stocks<\/span><\/strong><\/span><\/h2>\n

A tale of two chip stocks:- Broadcom confirmed this morning that it would offer to acquire Qualcomm in one of the largest tech deals of all time, and one that would consolidate two storied semiconductor companies into a single unit as the chip world has begun a course shift in the past year. But it\u2019s as much a story of a potential consolidation of fabless semiconductor giants as it is one of the performances of two companies \u2014 one that has done quite well, and one that has been emphatically ho-hum.<\/span><\/p>\n

As Qualcomm finds itself embroiled in a massive legal battle with Apple, one that could potentially escalate to the hardware level in which Apple extricates Qualcomm from its future devices, it\u2019s seen its stock face a steep decline \u2014 and then a massive jump following the news of the Broadcom deal. Meanwhile, Broadcom under CEO Hock Tan has seen its stock methodically climb over the past two years, seeing its market cap double.<\/span><\/p>\n

Here are the charts that show the stocks from the past two years. Qualcomm\u2019s is up nearly 20 percent, but that\u2019s following the announcement of the deal with Broadcom:<\/span><\/p>\n

Meanwhile, Broadcom has seen its stock more than double in the past year:<\/span><\/p>\n

Qualcomm also has seen some decline in revenue, both in this most recent quarter and also for the fiscal year of 2017. Here\u2019s a quick rundown of each company\u2019s revenue, including its past life as Avago Technologies:<\/span><\/p>\n

Qualcomm\u2019s patent portfolio is a point of strength for the company and the major source of tension in its spat with Apple and the continuing string of legal battles between the two. Here\u2019s a quote from Apple CEO Tim Cook from an early call to discuss its second-quarter performance with investors regarding the legal battle:<\/span><\/p>\n

\u201cThe reason that we\u2019re pursuing this is that Qualcomm\u2018s trying to charge Apple a percentage of the total iPhone value, and they do some really great work around standards-essential patents, but it\u2019s one small part of what an iPhone is,\u201d Apple CEO Tim Cook said on the company\u2019s second-quarter earnings call earlier this year. \u201cIt\u2019s not \u2014 it has nothing to do with the display or the Touch ID or a gazillion other innovations that Apple has done. And so we don\u2019t think that\u2019s right. And so we\u2019re taking a principled stand on it, and we strongly believe we\u2019re in the right. And I\u2019m sure they believe that they are, and that\u2019s what courts are for. And we\u2019ll let it go with that.\u201d<\/span><\/p>\n

Qualcomm said in its fourth-quarter release, which detailed its fiscal 2017 performance, that its net income fell 57 percent, to $2.5 billion in fiscal 2017 from $5.7 billion in fiscal 2016. Its diluted earnings per share, another critical metric for Wall Street, also fell 57 percent. In short, in the past year, Qualcomm has seen its earnings slip away even though it retains a leading position in the chip market.<\/span><\/p>\n

It\u2019s a very aggressive move for Broadcom and Tan, who while retaining dominance in the chip market are also facing a future where there\u2019s a new story in silicon: AI-heavy devices powered by GPUs, which specialize in the calculations required to handle processes like speech and image recognition. Nvidia has become a clear leader in this space, seeing a massive run-up as more and more car makers look to create some form of autonomous driving and companies explore building their own chip technology that can power their AI processes, like Apple and Google.<\/span><\/p>\n

Still, acquiring Qualcomm would consolidate those patents and Qualcomm\u2019s position as the next generation of wireless networks begins to play out and millions of internet-connected devices come online in the next several years. Should it come to pass that Apple exiles Qualcomm, the combined companies seem to be in a position to trim anything unnecessary and focus on where they perform best \u2014 or make aggressive moves into new areas.<\/span><\/p>\n

Source:-\u00a0https:\/\/techcrunch.com\/2017\/11\/06\/a-tale-of-two-chip-stocks\/<\/span><\/p>\n

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