Avago Acquires Broadcom Corporation For $37 Billion
by Brandon Chester on May 28, 2015 8:26 PM EST- Posted in
- Smartphones
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- Semiconductors
Today Avago Technologies announced their acquisition of Broadcom for 17 billion dollars in cash and 20 billion dollars worth of Avago shares. This will leave Broadcom shareholders with 32% of the new combined company, and the combined 37 billion dollar value of the deal makes it one of the largest ever acquisitions in the history of the semiconductor industry.
Avago is a semiconductor company that produces a number of different products. They make PCIe switches for motherboards, and at one point were the owner of SandForce and their SSD controllers before they were sold to Seagate. Some of their products also cross over with Broadcom’s focus on the wireless industry, such as their power amplifiers for mobile radios. Broadcom is a company that we encounter frequently in the mobile space, as they make many different chips for WiFi and GNSS. If you have a smartphone, it’s very likely that something in it was made by Broadcom. They also produce many of the chips used in networking equipment for data centers.
As for why Avago would seek to acquire Broadcom, it could be that both Avago and Broadcom hope to combine their product portfolios in order to compete with Intel and Qualcomm in the areas of wired and wireless networking. The combined company after the acquisition will be based in Avago’s home of Singapore, and will continue to be called Broadcom.
Source: Reuters
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icebox - Friday, May 29, 2015 - link
I'm curious what this means (if anything) for the Raspberry PI,,,Joe_Blow - Tuesday, June 2, 2015 - link
The Raspberry Pi is one of the brighter spots for Broadcom and it's paying for itself, which is a lot more than you can say for most products. Beyond the PR value, it's especially cost-effective since the technology is over four years old and there's no end in sight for the demand, especially now that they've recently upgraded to a quad-core CPU with a 30% faster clock speed in the SoC (only about one percent of the die area, the rest being the GPU).I don't care where someone got their MBA or what "deals" they've made, you can't beat a product that customers use and actually _love_. There's a lot to be said for the Raspberry Pi community and the Raspberry Pi Foundation's focus on education - you can't buy that kind of loyalty and good will with any amount of marketing and advertising.
It will be a while before the Avago HQ even knows what the Raspberry Pi is, and since it relies on the VideoCore IV GPU, that alone would justify revving the GPU to a VC V version. That's what they need to make sure they don't kill off in their exit from the idiotic abortive attempt to compete head-to-head with Qualcomm in the smartphone processor space (a prime reason they had to find a suitor to begin with).
ToTTenTranz - Friday, May 29, 2015 - link
How does a company with $10B of "total assets" and $430 yearly income get to purchase another company for $37B?DanNeely - Friday, May 29, 2015 - link
You're comparing apples and oranges. The two companies are about the same size; either could've eaten the other. Avago's market cap is $36.5bn, and has ~8500 employee's to Broadcom's 10500. Avago has $10.5bn in assets to Broadcom's 12bn. Net revenue for the last 3 years averaged ~$470m at avago vs $600m broadcom.Avago's actual outlay for the transaction is the $17bn in cash they're offering; the $20bn of stock that's the other half of the offer will be new shares. Of the cash being offered, most will probably be financed via borrowing.
lorribot - Friday, May 29, 2015 - link
It was more of a merger with a cash sweetener to the existing shareholders than a fully fledged purchase. The Sweetener was borrowed and will be paid jointly by both companies over time.Apparently in business, you can borrow billions to buy a company and then add that debt to the company you just bought and they pay it off and that is OK.
A number of American "investors" have done that with UK Football (soccer) clubs which spend the next few decades servicing the debt.
It makes no sense to me which is why I don't have a super yacht and have to watch the Monaco Grand Prix on the TV rather from the dockside.
ShieTar - Friday, May 29, 2015 - link
That capitalist magic. First they just printed 20 million new shares, which is justified by the fact that the overall company is now much bigger, so the overall value per share can remain the same.Second they got a credit from somewhere, either directly from a bank or by an earlier emission of shares. They can use the newly acquired company as a security for this credit, in the overall finance report of Avago it will look as if the debt-to-assets ratio was constant, because the new debt is covered by the new assets.
The fact that the debt-per-employee ratio has risen because the Broadcom employees now need to help paying the debt which was used to "buy them" shall not be discussed. Anybody predicting that this 37$b paycheck to the former Broadcom owners will at some point be covered by some government rescuing the now to-big-to-fail company must clearly be a naive socialist who you should never listen to
Shadowmaster625 - Friday, May 29, 2015 - link
It is funny that the Broadcom logo looks like a stock chart of a huge bubble. We are between the A and the D on that chart right now. These valuations are beyond nuts, we're in a full-on mania right now.zodiacfml - Friday, May 29, 2015 - link
Hmmm...... wireless. I guess they are anticipating it to get a lot bigger and Intel getting more serious in it.toyotabedzrock - Friday, May 29, 2015 - link
They should block this merger. Didn't broadcom buy atheros already?Primum - Friday, May 29, 2015 - link
Qualcomm bought Atheros.