Zacks_Analysts' Blog : Qualcomm Acquires Merger Approval - Analyst Blog

Qualcomm Inc. (QCOM), the largest global manufacturer of mobile phone chipsets, has received the merger approval from the shareholders of Atheros Communications Inc. (ATHR).

Earlier this year, Qualcomm entered into an agreement to acquire the leading Wi-Fi chip maker Atheros Communications, Inc. (ATHR) for roughly $3.3 billion or $45 per share in cash. This acquisition will be the largest in the history of Qualcomm.

On March 18, 2011, shareholders of Atheros held a special meeting relating to the merger agreement with Qualcomm Inc., where 74.6% of its members voted in favor of the deal. The board of directors of both the companies expect the transaction to be completed within the second quarter of 2011, subject to regulatory approval of certain regulatory bodies including the foreign regulatory authorities.

Atheros provides innovative technology services to both wireless and wired communications. So, this deal will benefit Qualcomm in many ways. Firstly, it will enable Qualcomm to diversify in the consumer electronics segment, particularly in the home networking market, where Atheros manufactures Wi-Fi chips for televisions, video games, printers, and other home devices. Secondly, Qualcomm will gain some potential clients like Dell Inc. (DELL), Hewlett-Packard Co. (HPQ), and Microsoft Corp. (MSFT) to whom Atheros provides service. Hence, the deal will further strengthen Qualcomm’s position globally and will allow the company to provide better services to its clients.

We believe that record-high earnings, strong balance sheet and solid management outlook for the current fiscal year will act as positive catalysts for the stock in the long run. Moreover, the gaining popularity of the smartphones and tablets will further drive the stock upward.

We maintain our long-term Outperform recommendation on Qualcomm. Currently, Qualcomm has a Zacks#2 Rank, implying a short-term Buy rating on the stock.