Markets

The Zacks Analyst Blog Highlights: Broadcom, Microsoft, Qualcomm, Apple and Alphabet

For Immediate Release

Chicago, IL - March 8, 2018 - Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Broadcom Ltd.AVGO , Microsoft Corp.MSFT , Qualcomm Inc.QCOM , Apple Inc.AAPL and Alphabet Inc.GOOGL .

Here are highlights from Wednesday's Analyst Blog:

Is the Broadcom-Qualcomm Deal in Jeopardy? Winners and Losers

In a rare intervention by the government, the U.S. Treasury's Committee on Foreign Investment in the United States (CFIUS) has outlined key concerns in a letter dated Mar 5, 2018 to both Broadcom Ltd. and Qualcomm Inc. related to their proposed merger deal. CFISU will closely review the deal and has asked Qualcomm to postpone shareholders' meeting for a month.

The decision of the regulatory body is unprecedented in view of the fact that Broadcom's proposed $117 billion (net of debt) bid for a hostile takeover of Qualcomm has not been finalized so far. The decision of the secretive government panel reflects an aggressive position by the administration to protect major American corporate names from being acquired by non-U.S. entities.

Importantly, several U.S. tech giants have taken a stand on the deal. While Apple Inc. will be a beneficiary if the deal goes through, both Microsoft Corp. and Google of Alphabet Inc. opposed the deal.

U.S. Treasury Raises Several Concerns

First, while Qualcomm is U.S. mobile chipset giant and a global leader for setting wireless standards, Broadcom is based in Singapore, notwithstanding the fact that the company expressed its desire in last November to shift its legal headquarter to the United States.

Second, Broadcom has a reputation of reducing R&D expenditures. Analysts have estimated that the company needs to raise more than $100 billion in debt to complete the proposed deal. Consequently, management may be tempted to cut R&D expenditures in order to service debt. Qualcomm generally spends more than 20% of its revenues on R&D every year.

Third, massive investment in R&D is an integral part of Qualcomm to maintain its global leadership position in the smarphone chipset market. Compromising Qualcomm's assets through arrangements with "third party foreign entities," will significantly affect national security of the United States.

The third party entities, especially, the Chinese tech giants like Huawei and ZTE may get access to Qualcomm's precious patents from Broadcom or at least a stalled R&D activity may result in Qualcomm losing its competitive edge in the upcoming 5G wireless network standard to its Chinese counterparts. Qualcomm has issued and applied more than 130,000 patents primarily in smartphone areas.

Both Broadcom and Qualcomm currently carry a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Winners and Losers

If the Broadcom-Qualcomm deal sees light of the day, smartphone giant Apple may be a major beneficiary. Qualcomm which provides chipset for iPhone and iPAD is currently engaged in $1 billion legal battle related to royalty payment with Apple. But Broadcom expressed desire to resolve the litigation amicably if the deal goes through.

Meanwhile, Microsoft and Google of Alphabet have raised concern about the proposed merger. These two tech giants consider an independent Qualcomm as being more closely aligned with their interests than a Broadcom-owned Qualcomm.

For Google, most of the Android-based smartphones and tablets run on Qualcomm's chipset. Consequently, a decline in chipset standard will be detrimental to Google. Similarly, Microsoft recently unveils first Windows 10 OS based PCs using Qualcomm's chipset.

Telecom M&A to Become Tougher

The decision will have a strong bearing on the merger and acquisition (M&A) activities in the telecom space.

On one hand, President Trump has stated that he wants to do away with nearly 75% of all governmental regulations during his tenure. The telecom industry will be one of the major beneficiaries of this policy change. A new Federal Communications Commission (FCC), helmed by Ajit Pai, exercising lesser restrictions, certainly augurs well for the telecom industry.

On the other hand, a sheer protectionist strategy like national security reflects growing concern by Trump administration over the flurry of deals in the United States by foreign companies.

The government seems highly concerned about the fact that United States may lose its edge in areas like technology and telecom to China and other Asian countries. In recent months, CFIUS has blocked takeover deals of U.S. companies MoneyGram and Lattice Semiconductor by Chinese counterparts.

Importantly, In January 2018, security officials of Trump administration have considered the prospect of the government building its own 5G network to combat China's economic and cyber threat.

Bottom Line

While the U.S. tech industry is divided about the potential impact of the Broadcom-Qualcomm deal, the U.S. government expressed severe concern about the potential risk of an unnamed actor, possibly Huawei, working through Broadcom to hurt U.S. national security.

While Apple stands to gain from the deal, Microsoft and Alphabet could lose out if it goes through. This explains their opposing stands on the issue even as the fate of this key deal hangs in the balance.

Breaking News: Cryptocurrencies Now Bigger than Visa

The total market cap of all cryptos recently surpassed $700 billion - more than a 3,800% increase in the previous 12 months. They're now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.

Zacks' has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.

Click here to access these stocks >>

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss . This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Alphabet Inc. (GOOGL): Free Stock Analysis Report

QUALCOMM Incorporated (QCOM): Free Stock Analysis Report

Apple Inc. (AAPL): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

Broadcom Limited (AVGO): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

QCOM MSFT AVGO GOOGL AAPL

Other Topics

Stocks

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More