SAN JOSE, Calif. -- Broadcom Limited (NASDAQ: AVGO) ("Broadcom") today released the following letter to Members of Congress regarding its offer to acquire Qualcomm Incorporated (NASDAQ: QCOM) ("Qualcomm"):
Dear Member of Congress:
We appreciate your interest in our offer to acquire Qualcomm Incorporated and would like to take this opportunity to respectfully address a number of issues with regard to this transaction and its potential impact.
Much of the recent communication about our acquisition has centered on concerns about the future development of 5G technology. To make it clear that we are steadfast in our support of 5G development, I recently made this public pledge: Broadcom is committed to making the United States the global leader in 5G. Any notion that a combined Broadcom-Qualcomm would slash funding or cede leadership in 5G is completely unfounded. We have a proven track record of investing in and growing core franchises in the companies we acquire. In the case of Qualcomm, this will be 5G cellular. We are fully committed to making the United States the global leader in 5G by focusing resources and strengthening leadership in this area. We also will work closely with the United States government as we drive to achieve and sustain this global leadership in 5G and beyond.
Consistent with that commitment, Broadcom is also pledging to create a new $1.5 billion fund with a focus on innovation to train and educate the next generation of RF engineers in the United States. This will ensure America's continued leadership in future wireless technology.
In addition, Broadcom will not sell any critical national security assets to any foreign companies. Of course, any dispositions of assets to foreign buyers would be themselves subject to CFIUS review.
The reality is that right now, Qualcomm faces a number of challenges that hamper its role in developing 5G. One is that it has been funding its R&D with licensing revenue derived from predatory and anticompetitive practices that have put it at odds with customers and antitrust regulators around the world. There is no truth to Qualcomm's argument that its anticompetitive licensing practices are needed to fund a robust R&D effort. None of the industry's other great innovators violate the law in order to finance their R&D. In recent years, Qualcomm also has seen significant revenue declines during a period of strong industry growth and has underperformed its peers in revenue, gross profit and net income.
In sharp contrast, Broadcom funds our R&D through lawful practices, and has a rich and ongoing legacy of innovation, which drives its leading core franchises and delivers shareholder returns that are eight times those of Qualcomm over the past five years.
Second, I want to make it clear that Broadcom is today in every important respect an American company. We are built on the roots of several innovative and leading United States technology companies including Hewlett-Packard, AT&T, Broadcom Corporation and Brocade Communications Systems. Broadcom is led by an executive team of American citizens and a Board of Directors made up of nearly all American citizens. Ninety percent of Broadcom's shareholders are in the United States; in fact, we are largely owned by the same United States institutional investors that own Qualcomm. More than half of Broadcom's total workforce is in the United States, across more than 25 states, including Texas, Colorado, California and Pennsylvania. When we complete our acquisition of Qualcomm, we expect to have more than 25,000 employees in the United States, working to make Broadcom the leading communication semiconductor company in the world.
The company is currently managed from its headquarters in San Jose, California. Today, we are in the final stages of redomiciling to the United States, and expect this process will be completed no later than May 6, 2018. From our base here, each year we will invest $3 billion in research and engineering and $6 billion in manufacturing, resulting in more high-paying tech jobs in the United States. Due to this move, we will also pay hundreds of millions of dollars in additional taxes to the United States. This is the right move because Broadcom is an American company in all respects but its legal domicile.
The bottom line is that a combined, American Broadcom-Qualcomm will be a more focused and stronger champion for sustained United States leadership in 5G than a standalone Qualcomm, an outcome that strongly supports America's national security interests.
If you have any questions or would like to discuss this important matter further, please let me know. We want to be as cooperative as possible in this process.
/s/ Hock Tan
President and Chief Executive Officer
CC: Senator John Cornyn (R-TX)
Senator Tom Cotton (R-AR)
Senator Richard Burr (R-NC)
Senator Mark Warner (D-VA)
Representative Adam Schiff (CA-28)
Representative Devin Nunes (CA-22)
Representative Duncan Hunter (CA-50)
Representative Doug Collins (GA-09)
Representative Juan Vargas (CA-51)
Representative Liz Cheney (WY-AL)
Representative Mike Coffman (CO-06)
Representative Mike Conaway (TX-11)
Representative Mike Gallagher (WI-08)
Representative Mike Rogers (AL-03)
Representative Scott Peters (CA-52)
Moelis & Company LLC, Citi, Deutsche Bank, J.P. Morgan, BofA Merrill Lynch, Morgan Stanley and Wells Fargo Securities are acting as financial advisors to Broadcom. Wachtell, Lipton, Rosen & Katz, Latham & Watkins LLP, Simpson Thacher & Bartlett LLP and O'Melveny & Myers LLP are acting as legal counsel.
In a separate release:
SAN JOSE, Calif. -- Broadcom Limited (NASDAQ: AVGO) ("Broadcom") today pledged the following commitments regarding its offer to acquire Qualcomm Incorporated (NASDAQ: QCOM) ("Qualcomm"):
Our Pledge to Leading 5G
Broadcom has a successful 50-year heritage of building leading communications technologies including Wi-Fi, broadband access, network switching and routing. With its proven track record of investing in and growing core franchises, Broadcom is committed to making the U.S. the global leader in 5G.
Broadcom acquires companies to focus resources and strengthen leadership in their core franchises. In the case of Qualcomm, this will be 5G cellular.
Our Pledge to Accelerate Innovation and R&D
Broadcom has a proven track record of managing R&D for maximum impact and investing in core franchises. Broadcom will not only maintain the R&D resources Qualcomm devotes to 5G and innovation in future wireless standards – we will also focus R&D spend to those critical technologies that are essential to the U.S.
Consistent with our commitment, Broadcom is pledging to create a new $1.5 billion fund with a focus on innovation to train and educate the next generation of engineers in the U.S. This will ensure America's lead in future wireless technology.
Importantly, Broadcom will fund enhanced R&D through lawful business practices rather than predatory and anticompetitive behavior. There is no truth to Qualcomm's argument that its anticompetitive licensing practices are needed to fund a robust R&D effort.
Our Pledge to Creating a Stronger Combined American Company
Broadcom is in every important respect an American company, with a lineage of great American technology icons like Hewlett-Packard, AT&T, Broadcom Corp., and Brocade Communications Systems, Inc. We are now in the final stages of redomiciling to the United States, and that process will be complete no later than May 6, 2018. When we complete our acquisition of Qualcomm, we expect to have more than 25,000 employees in the U.S., working to make Broadcom the leading communication semiconductor company in the world.
Broadcom Corp. (Nasdaq: BRCM)