A U.S. Navy office charged with investigating foreign investment in U.S. companies helped scuttle Broadcom Corp.’s hostile takeover of Qualcomm Inc. in March, a U.S. Navy admiral told a San Diego audience of military and civic leaders on Aug. 22.
Vice Adm. Dixon Smith made the comments while briefing his audience about his job at the Pentagon. As deputy chief of naval operations for fleet readiness and logistics, Smith also manages a small group of people who evaluate offshore investment in U.S. companies. Among other things, the group investigates possible ties to nation states.
In the network of people trying to buy Qualcomm (Nasdaq: QCOM), the Navy team “found a connection we’re uncomfortable with,” Smith said. He did not elaborate.
Broadcom (Nasdaq: AVGO), then based in Singapore, pursued a $121 billion hostile bid for Qualcomm starting in November. President Trump blocked the sale on March 12, after a Treasury Department committee said the sale would harm national security. Qualcomm makes microchips for wireless telecommunications and engineers wireless telecommunications technology, including a new technology called 5G.
Broadcom, which recently moved its headquarters to the United States, has been on an acquisition streak, recently taking on San Jose-based Brocade Communications Systems Inc. for $5.5 billion. In July, Broadcom announced plans to buy New York-based software maker CA Technologies for $18.9 billion in cash.
Broadcom’s interest in Qualcomm goes back to at least 2016 when, according to a Qualcomm securities filing, Broadcom CEO Hock Tan told Qualcomm CEO Steve Mollenkopf that Qualcomm should buy Broadcom.
In his remarks Wednesday, Smith said he cited the Qualcomm example by name because it had been in the news media.
The Navy is concerned about foreign investment because there are people trying to steal U.S. technology, and people “learning things we don’t want them to learn.” The team evaluates 240 companies a year, Smith said, but that will go up to 1,000 per year in 2020, he said.
“This is a big deal,” Smith said. “We’re in a great power competition right now.”
Smith, who previously ran shore bases in San Diego, made his remarks at the monthly breakfast meeting of the San Diego Military Advisory Council, a military-civic group which works to bridge the gap between the military and the wider community.