Avago/Broadcom takeover will create a major force in wired comms

May 29, 2015 // By Graham Prophet
Avago Technologies has announced that it is to acquire Broadcom Corporation, for $37bn. This will represent a slightly-more-than-doubling of the size of Avago, as the estimated vale of the merged enterprise is put at $77bn. Avago says that it is creating “the world's leading diversified communications semiconductor company”.

Avago’s roots trace back to the original Hewlett-Packard; it was the semiconductor products group of Agilent Technologies when that was split off from HP, and was itself spun out as Avago Technologies in 2005. It has been a serial (if relatively low-key) acquirer of both technology and product lines (fibre and acoustic-wave technology from Infineon, for example) and companies (notably LSI Corp. in 2013). The Broadcom acquisition is by far the biggest such deal in its history.

Avago’s own self-portrait reads; “... is a leading designer, developer and global supplier of a broad range of analog semiconductor devices with a focus on III-V based products and complex digital and mixed signal CMOS based devices. Avago's product portfolio is extensive and includes thousands of products in four primary target markets: wireless communications, enterprise storage, wired infrastructure and industrial and other.”

Hock Tan, President and Chief Executive Officer of Avago commented, “The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors. Avago has established a strong track record of successfully integrating companies onto its platform. Together with Broadcom, we intend to bring the combined company to a level of profitability consistent with Avago's long-term target model.”

Analyst IHS says of the merger that, with combined revenues of $14bn (2014 figures) the new entity will immediately become the sixth-largest semiconductor company in the world. IHS’ Dale Ford, vice president and chief analyst, notes, “This is the latest and by far the largest, merger in the semiconductor industry, as major players continue to move in an aggressive way to establish position and profitability in key segments of the industry.” Considering the non-memory sector of the industry, the new Avago will be third only to Intel and Qualcomm, he adds, forming a dominant presence in communications and storage ICs. Outside of these two areas (IHS continues), “Broadcom has a much smaller presence in consumer electronics and industrial electronics