By Aaron Pressman
November 13, 2017

Broadcom and Qualcomm battled through press releases on Monday while investors tried to figure whether the two semiconductor giants would actually merge.

Analysts expect Broadcom to raise its $105 billion bid that it made last week after Qualcomm said Monday that it had rejected the unsolicited $70 per-share offer. But because investors expect a drawn out battle, Qualcomm’s stock price gained only 2% in early trading.

The bid “significantly undervalues Qualcomm relative to the company’s leadership position in mobile technology and our future growth prospects,” Paul Jacobs, chairman and son of Qualcomm co-founder Irwin Jacobs, said in a statement. The language, obviously, left open the door to a higher bid.

Broadcom quickly fired back a few hours later, saying it “remains fully committed” to buying Qualcomm. Broadcom CEO Hock Tan, famed for his M&A expertise in the chip industry, said Qualcomm shareholders told him that they were interested in the deal.

“Many have expressed to us their desire that Qualcomm meet with us to discuss our proposal,” Tan said in his statement. “It remains our strong preference to engage cooperatively with Qualcomm’s Board of Directors and management team.”

That was a not-so-veiled threat to pursue a hostile takeover if necessary.

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Analysts said Broadcom could easily raise its bid to $80 or $90 per share—or as much as $130 billion—and still make out well with the acquisition. Tan is known as a fierce cost cutter, who buys companies and eliminates overhead and cuts back on research and development. Broadcom has told analysts and investors it could chop $3 billion from Qualcomm’s expenses, boosting operating profit by about 30%. And that doesn’t take into account ending Qualcomm’s royalty rate feuds with Apple (aapl) and another unidentified phonemaker that are costing the company another $3 billion a year or more. Tan has suggested he would quickly settle.

“Our math suggests Broadcom has a significant amount of room to play with,” Bernstein analyst Stacy Rasgon wrote on Monday. “A properly-timed raise to the price (perhaps coincident with more aggressive moves) might easily be plausible.”

Canaccord Genuity analyst Mike Walkley wrote, “We believe Broadcom is likely to increase its bid.” Monday’s back and forth signaled to Walkley that “Qualcomm’s licensing business remains undervalued and both companies believe Qualcomm can resolve its licensing issues with Apple and another leading OEM.”

If Tan follows his usual playbook, he might quickly get rid of parts of Qualcomm and use the proceeds to pay down debt and improve cash flow, analyst Amit Daryanani at RBC Capital Markets, predicted. Aside from Qualcomm’s market leading mobile communications chips, other units including licensing patents could be “kept, divested or shut down as appropriate,” Daryanani wrote on Monday. Broadcom “can not only resolve the host of customer disputes but also various regulatory issues (Qualcomm) is engulfed in by implementing a fundamental change in the (Qualcomm) business model.”

But Qualcomm’s beaten down stock price showed far less optimism among investors that a deal could be consummated quickly. Amid all the fighting with Apple, and accompanying loss of revenue, Qualcomm’s shares had fallen 20% this year through late October to $51 before rumors of Broadcom’s interest leaked.

On Monday, Qualcomm’s (qcom) shares were up to almost $66, though still below the $70 bid. Broadcom’s (avgo) shares, up almost 50% so far this year, were largely unchanged on Monday at $264.28.

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