Qualcomm shares rise as broker upgrades stock after Broadcom's hostile takeover bid

Broadcom’s attempt at a hostile takeover of Qualcomm could give the latter's management team a shot in the arm, said analysts at Instinet
Qualcomm
Qualcomm has sent a letter to shareholders urging them to reject Broadcom's offer

Qualcomm Inc (NYSE:QCOM) shares jumped after the company’s 2019 guidance beat analysts’ expectations and Instinet upgraded the stock in the wake of a hostile bid from Broadcom Ltd.

The US semiconductor company expects adjusted per share profit to be between US$6.75 and US$7.50 on revenue of US$35 billion to US$37 billion in 2019.

Analysts had expected a profit of $3.79 per share on revenue of $23.59 billion, according to Thomson Reuters.

Qualcomm’s board in November rejected a US$105bn takeover bid from Broadcom, saying it undervalued the company.

The group sent a letter to shareholders on Tuesday urging them to reject the bid.

Chief executive Steve Mollenkopf was to share a presentation with shareholders that promises a "clear path to significant near-term value creation”.

Instinet raised its rating on the stock to ‘buy’ from ‘neutral’, saying it believes Broadcom’s attempt at a hostile takeover will give Qualcomm's management team a shot in the arm.

“We expect the company to more aggressively focus on driving shareholder value in order to remain a standalone franchise," wrote analyst Romit Shah, including by closing the acquisition of NXP Semiconductors.

Shah said Qualcomm might also consider settling its legal battle with Apple Inc.(NASDAQ:APPL) Qualcomm has accused Apple of patent infringement in the use of its chips in iPhones.

"This would likely come as the strongest counter to Broadcom's attempt to buy the company," Shah argued.

Shares rose 2.35% to US$66.96 each in early US trading.

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