Avago in “advanced talks” to buy Broadcom - report

Avago in “advanced talks” to buy Broadcom – report

28 MAY 2015

Chipmaker Avago Technologies is in advanced talks to buy rival Broadcom in a deal said to be worth $35 billion, according to The Wall Street Journal (WSJ).

Details are unclear, but WSJ said a deal could be announced today. According to Reuters’ sources, however, an announcement is more likely to be made early next week.

Rumours of Avago’s interest come at a time when Broadcom is struggling to grow, managing a modest 1.5 per cent year-on-year increase in 2014 sales, to $8.4 billion.

In mid-2014, Broadcom announced it would wind down its struggling cellular baseband business after failing to find a buyer.

At the same time, the company said its worldwide headcount would be reduced by 2,500 employees (the company had around 12,500 employees at the end of 2013).

“It’s really economically difficult to be a small semiconductor maker now,” Broadcom chief executive Scott McGregor said earlier this year, quoted by WSJ. “The larger companies are going to look for consolidation.”

Despite Avago playing the role of predator, the market capitalisation of the two companies – as Reuters reports – is not dissimilar, at least immediately after news broke on Wednesday afternoon about a possible deal.

Shares of Broadcom jumped almost 20 per cent, while Avago’s rose 9 per cent, giving market capitalizations of $34 billion and $36 billion respectively.

Broadcom’s portfolio includes processors for tablets and smartphones, while Avago chips are targeted at wireless and enterprise storage markets.

Avago’s fiscal 2014 revenue was $4.3 billion. Although just over half the amount generated by Broadcom, it was up 71 per cent compared with the previous year.

Avago will announce its Q2 2015 results today (28 May).


Ken Wieland

Ken has been part of the MWC Mobile World Daily editorial team for the last three years, and is now contributing regularly to Mobile World Live. He has been a telecoms journalist for over 15 years, which includes eight...More

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