While it now seems unlikely to go ahead, a takeover of Qualcomm could give Broadcom a much-needed boost in an area where it is now lacking: 4G/LTE networking technology.
The value of Broadcom's bid has not been decided, though an offer in the range of around $70 to $80 per share is being contemplated, one of the sources said.
While Broadcom is expected to indicate its willingness to let Qualcomm complete its deal to acquire NXPI, it is also expected to encourage the company not to raise its current $110 cash deal to acquire the company.
Specifically Broadcom is offering to pay $70.00 per Qualcomm share, with $60.00 being in cash and $10.00 per share in Broadcom shares. The combined company, now called Broadcom, made a much-publicized announcement with Donald Trump to move its home base to Delaware.
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Should Broadcom make an offer for Qualcomm, it's not clear whether Qualcomm would be receptive or whether the deal would be approved by federal antitrust regulators. If successful, Broadcom/Qualcomm would have a virtual monopoly and vast patent portfolio on wireless chips and technology.
Broadcom shares were up 1.5 pct at $277.78 in premarket trading.
Qualcomm shares, which traded over $70 as recent as December 2016, closed at $61.81 on Friday.
Shares of Broadcom have rallied this year while Qualcomm has fallen, making the target more vulnerable. Qualcomm's recent forward PE of 15.4 was well below its 25.9 average.
Meanwhile, Qualcomm is now engaged in a legal battle over royalty payments with its biggest company Apple. It's even less certain that ultimately there would be such a deal, given potential regulatory and other hurdles. Broadcom's bid comes amid a legal battle between Qualcomm and Apple that could cost the semiconductor company one of its largest customers. That means the deal would bypass oversight from the regulator that scrutinizes deals between U.S. and foreign companies, but the Department of Justice is still likely to raise antitrust concerns.