Broadcom CEO Hock Tan is paying a price for not properly judging the American President Donald Trump to bring the Chinese on their knees said CNBC’s Jim Cramer.
Trump feels he has to “sacrifice Broadcom on the altar of Huawei” to humble China in trade negotiations, Cramer argued. Last year, Broadcom received about $900 million in revenue from China-based Huawei, a major maker of smartphones and mobile networking gear.
“The president regards Huawei as the Achilles’ heel” of Chinese leader Xi Jinping
. The calculation in effectively blacklisting Huawei from doing business with American companies is that China would never let one of its crown jewels of technology fail, the “Mad Money”
Tan may be feeling that Trump came a little hard on Broadcom, according to Cramer, bringing into notice that the CEO in 2017 went to the White House and made announcements od relocating his Singapore based company back in the United States.
In the past, Trump administration knocked out Broadcom’s $117 billion bid to buy San Diego-based Qualcomm
on national security grounds.
“What a kiss of death, if you’re a great friend with the president,” Cramer said.
“Broadcom is a remarkably good company and it’s going to be hurt” in the crossfire between the world’s two biggest economic superpowers, he explained.
Shares of Broadcom faced a huge drop on Friday’s open on Wall Street after the semiconductor maker on Thursday delivered a weaker than expected quarterly revenue. Broadcom also announced a 2019 revenue forecast cut, predicting a slowdown in demand stemming from the conflicts between Washington and Beijing. This is being “driven by continued geopolitical uncertainties,” Tan said in a statement.
The company is also seeing the “effects of export restrictions on one of our largest customers,” Tan added, in a reference of Trump administration banning Huawei last month, without special permission, from buying supplies from the US. Although, the Commerce Department did put the move on hold for 90 days.
The White House is concerned that the Chinese tech giant Huawei is too close to the Chinese communist government and they fear that Huawei technology is being used to spy on the US. Huawei has repeatedly asserted that it is independent from the Chinese government.
A spokesperson for the White House was not immediately available to respond to CNBC’s request for comment on Cramer’s remarks.