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Nov. 10, 2015, 6:21 PM
- As expected, both Avago (NASDAQ:AVGO) and Broadcom (NASDAQ:BRCM) shareholders have approved the companies' planned merger. Avago states over 99% of shareholder votes were cast in favor of the deal. (PRs: Avago, Broadcom)
- The deal is expected to close in late 2015 or early 2016, following (expected) regulatory approvals; EU regulators are reportedly set to sign off. As previously announced, Broadcom shareholders can elect to receive either $54.50/share in cash or 0.4378 shares (current value of $52.47), with half the total payout in cash and half in stock.
- Avago fell 5.3% and Broadcom fell 3.3% in regular trading following a Credit Suisse report stating Apple has cut iPhone component orders by up to 10%.
Nov. 3, 2015, 6:19 AM
- EU antitrust regulators are set to unconditionally approve Avago Technologies' (NASDAQ:AVGO) proposed $37B takeover of Broadcom (NASDAQ:BRCM), according to Reuters.
- The acquisition is one in a series of global semiconductor deals this year, with consolidation driven by demand for cheaper chips and new products to power Internet-connected devices.
Oct. 6, 2015, 12:57 PM
- Skyworks (NASDAQ:SWKS) has tumbled towards $75 after announcing it's buying storage and telecom IC vendor PMC-Sierra (NASDAQ:PMCS) for $2B in cash on hand. (PR)
- Fellow RF chipmaker Avago (AVGO -6.7%), which (thanks to the LSI acquisition) competes against PMC-Sierra in the storage controller market, is also off, as is merger partner Broadcom (BRCM -3.2%), which competes against PMC to an extent in the telecom IC and network processor markets. RF peer Qorvo (QRVO -3.3%) is also getting hit. The Nasdaq is down 1.2%.
- Possibly hurting the group: Skyworks has used the PMC deal to announce it expects FQ4 (calendar Q3) revenue of $880M and EPS of $1.52. That's slightly above prior guidance of $875M and $1.51 and a consensus of $876M and $1.51, but expectations have been high following a long string of beat-and-raise quarters.
- The PMC acquisition expands Skyworks' reach to a slew of non-RF chip markets and enterprise/telecom infrastructure end-markets. It's expected to yield $75M in cost synergies within 12 months of closing (expected in 1H16), and subsequently boost Skyworks' annual EPS by $0.75. Assuming that target is hit, Skyworks is paying 14x forward EPS.
- Update (1:04PM ET): BofA/Merrill is defending Skyworks and Avago, arguing forward P/Es of less than 10 make shares very cheap.
- Update 2 (5:01PM ET): The group staged a comeback in afternoon trading. Skyworks closed down 1.4%, Avago 3.4%, Qorvo 1.1%, and Broadcom 1.6%. The Nasdaq closed down 0.7%.
Aug. 6, 2015, 9:53 AM
- Qualcomm (QCOM -0.5%), via its Atheros Wi-Fi/connectivity chip unit, is buying DSL modem/infrastructure IC and home gateway processor vendor Ikanos (NASDAQ:IKAN) for $2.75/share, or roughly $47M based on Ikanos' Q2 diluted share count. The price represents a 57% premium to Ikanos' Wednesday close. The deal is expected to close by year's end.
- Ikanos' products complement Qualcomm/Atheros home Wi-Fi and wireline networking offerings. Qualcomm: "The combination of Qualcomm Atheros' broad home gateway IP portfolio, including Wi-Fi, powerline, small cell, and Ethernet switch technologies, and Ikanos' advanced wired modem technology, is designed to create a complete solution for a wide range of home gateway products to better serve the carrier segment." Broadcom (NASDAQ:BRCM) and Marvell (NASDAQ:MRVL) are among the other companies competing in this space.
- Qualcomm CEO Steve Mollenkopf suggested last week his company would make new chip acquisitions.
Jul. 17, 2015, 4:16 PM
- Not content with its recent ~$37B cash/stock deal to merge with Broadcom (BRCM +0.2%), acquisition-hungry Avago (AVGO -0.8%) is looking to bid for Broadcom rival Marvell (MRVL +0.5%), "a reputable source" tells Light Reading.
- Marvell moved slightly higher following the report. With a current $6.7B market cap - a deal could require a price above $8B - Marvell would be a relatively easy fish to swallow. However, its product line overlaps with Broadcom's in the Ethernet transceiver, Ethernet switching chip, and Wi-Fi/Bluetooth combo chip markets (among other areas), and the Ethernet overlap could result in antitrust scrutiny.
- There has been speculation Avago isn't done with its buyout binge. The company snapped up LSI, PLX Technology, and Emulex prior to the Broadcom deal, and has a good track record of reaping major cost synergies from acquisitions.
- Meanwhile, Marvell has been viewed as a potential acquisition target as the chip industry continues consolidating. Shares rose earlier this week on a report of buyout interest from state-owned Chinese firm PDSTI.
Jun. 25, 2015, 1:29 PM
- Broadcom (BRCM -0.1%) is partnering with Chinese networking hardware leader H3C (until recently an HP subsidiary) to "explore new market requirements and technical trends to optimize the interaction and performance of current and future platforms and architectures." H3C uses Broadcom's Ethernet ICs in its hardware.
- The company is also partnering with Chinese systems integrator Inspur on 4K/DOCSIS 3.0 set-top solutions relying on Broadcom's chips, and with Beijing-based pay-TV provider StarTimes to "jointly define and develop set-top box offerings in Africa," and "invest engineering resources to develop a series of low-cost set-top boxes and high-end Ultra HD home gateways."
- Broadcom has been taking set-top IC share from STMicroelectronics. On its Q1 CC (transcript), the company stated its set-top/broadband modem chip sales grew at a double-digit Y/Y clip.
- Meanwhile, speculation continues to swirl that Avago (AVGO +0.3%), which is set to merge with Broadcom in a ~$37B cash/stock deal (follows deals for LSI, PLX, and Emulex), is up for further M&A. FBR's Chris Rolland: "They are looking for higher quality, accretive ideas that typically diversify their business. The target list is many."
- With all 4 of Avago's recent deals having a major data center component, Gartner's Sergis Mushell thinks the company could look to fill remaining holes in its data center line, such as power management and timing ICs. IDC believes analog/mixed-signal chipmakers with high gross margins could be in play - Texas Instruments appears to be looking in that direction.
- Prior Broadcom/Avago coverage
May 28, 2015, 1:34 PM
- In a presentation (.pdf) discussing their planned merger, Avago (AVGO -0.4%) and Broadcom (BRCM -2.6%) state they're aiming for a 40% long-term op. margin, up from the 30% collectively possessed by the companies today. Gross margin is forecast to rise to 60% from a current 57%, and R&D and SG&A spend respectively fall to 16% and 4% of revenue from 20% and 7%.
- Avago and Broadcom, who have $15.1B in revenue between them, are only forecasting a 5% long-term revenue CAGR. However, Avago CEO Hock Tan states the outlook is "probably conservative."
- Avago plans to partly finance the $17B cash portion of the deal via $9B worth of new debt. The post-merger company is expected to have $15.5B in debt and $1.3B in cash; Broadcom shareholders will have a 32% stake. The deal is expected to close in Q1 2016.
- Many potential product synergies exist. Among the possibilities: Wi-Fi/Bluetooth solutions that pair Broadcom's combo chips with Avago RF components; server/storage connectivity product lines featuring a mixture of Broadcom's Ethernet transceivers and switching chips and Avago's adapter cards and optical transceivers - Stifel thinks Mellanox (MLNX -0.3%) could be at risk here - and telecom equipment product lines that combine Broadcom's network processors and switching chips with Avago's optical components.
- Meanwhile, in its FQ2 report (issued in tandem with the merger announcement), Avago has guided for FQ3 revenue of $1.74B (+/- $25M), above a $1.68B consensus. The company reported a 66% Y/Y increase in FQ2 wireless chip revenue (aided by strong Apple/Samsung demand), along with 74% and 64% increases in wired infrastructure and industrial/other revenue (lifted by both organic growth and M&A).
May 28, 2015, 7:21 AM
- Avago Technologies (NASDAQ:AVGO) announces it will acquire Broadcom (NASDAQ:BRCM) in a stock and cash transaction valued at $37B.
- Broadcom shareholders will receive $54.50 in cash per share and 0.4378 shares in the newly formed company as part of the deal
- Avago expects the acquisition to be immediately accretive to earnings and help it generate $750M in annual cost synergies within 18 months of the closing.
- BRCM +0.85% premarket to $57.64 after soaring yesterday off leaked reports of the deal.
- Previously: Avago reportedly in merger talks with Broadcom; shares soar (May. 27 2015)
May 27, 2015, 2:26 PM
- The WSJ reports Broadcom (BRCM +16.6%) is "in advanced talks to be bought" by Avago (AVGO +6.4%). Shares of both companies have shot higher.
- A deal would effectively be a merger rather than an acquisition: Avago is currently worth $35.1B, and Broadcom $32B. The post-merger company would have a massive product line spanning a variety of mobile, networking, home electronics, and telecom equipment chip markets.
- Avago has bought a string of companies over the last 18 months amid a massive chip industry consolidation wave, and has been rumored to be eying several others.
- Update (3:37PM ET): Bloomberg is backing up the WSJ's report, while adding a deal could be announced as soon as tomorrow.
- Update 2 (3:50PM): CNBC reports Avago's board plans to vote on the deal tonight.
Apr. 9, 2015, 9:52 AM
- CNBC's David Faber has reported Intel (NASDAQ:INTC) has ended talks to acquire FPGA vendor Altera due to a failure to agree on price. That has fueled speculation Intel will make a bid for Broadcom (NASDAQ:BRCM), which competes with Intel in several telecom/networking chip markets and complements the chip giant's offerings in many others.
- Also possibly helping Broadcom: Ladenburg Thalmann has launched coverage with a Buy rating and $51 target.
- With a current $26.3B market cap - a buyout price would likely have to be over $30B - Broadcom would be a big fish to swallow. Q1 results arrive on April 21.
Mar. 19, 2015, 5:52 PM
- After rising 5.8% in regular trading today, specialty analog/mixed-signal chipmaker Microsemi (NASDAQ:MSCC) is up 8% since announcing yesterday morning (just before its analyst day) it's buying Ethernet chipmaker Vitesse (NASDAQ:VTSS) for $389M. Shares have made new highs along the way.
- Vitesse closed today $5.31, $0.03 above Microsemi's offer price. Ascendiant Capital's Cody Acree calls the offer "a bit low," and (given the deal is expected to be immediately accretive for Microsemi) thinks a rival bid might arrive. "Potential suitors could include Broadcom (NASDAQ:BRCM) or Marvell (NASDAQ:MRVL), who are already leaders in Ethernet and would see natural synergies in VTSS’s portfolio or Avago (NASDAQ:AVGO) who has also been particularly acquisitive."
- Meanwhile, Stifel's Tore Svanberg has hiked his Microsemi target by $5 to $40 in response to the Vitesse deal and Microsemi's analyst day presentations (slides - .pdf). "[M]anagement reiterated its strategy to maximize profitability, grow its market share in core products, while expanding its [addressable market] through new product initiatives and deeper penetration into their existing customer base."
- Svanberg adds the Vitesse deal "helps expand [Microsemi's] silicon/dollar content initiatives, especially in the comms infrastructure space and adds differentiated technology with high barriers to entry." He sees the purchase making Microsemi's goal of achieving a 60% gross margin and 30% op. margin in 2016 (compares with 56.2% and 24.4% in calendar Q4) easier to attain.
Feb. 2, 2015, 10:13 AM
- Intel (INTC -0.7%) is acquiring Lantiq Semiconductor, a German developer of modem/transceiver chipsets and SoCs for home/office broadband hardware and carrier access equipment. Terms are undisclosed; presumably, the deal will be paid for with offshore cash.
- Lantiq's product line includes chips for DSL infrastructure gear, VoIP devices, GPON fiber-to-the-home networks, and DSL/Wi-Fi, Ethernet/Wi-Fi, and DSL/4G home gateways. The company has over 2K patents and design wins for hardware used on 100+ carrier networks.
- Intel declares the acquisition will "expand Intel's success in the cable residential gateway market and broaden its offering to other gateway markets, including DSL, Fiber, LTE, retail and IoT smart routers," and that pairing Intel's cable modem/gateway chip ops (i.e. the Puma line) with Lantiq's tech and talent "can allow global service providers to introduce new home computing experiences and enable consumers to take advantage of a more smart and connected home."
- Broadcom (BRCM -3.5%) isn't reacting well to the news. The company counts Intel as a major competitor in the cable modem/gateway and Wi-Fi chip markets (among others), and Lantiq as a major rival in the DSL and GPON chip markets. Shares rallied last Friday in response to Broadcom's Q4 beat.
- The purchase comes six months after Intel agreed to buy LSI/Avago's Axxia network processor unit (competes against Broadcom and several other firms) for $650M.
Jun. 17, 2014, 6:58 PM
- The consolidation wave that has hit the semi industry could soon yield tax inversion deals for foreign firms similar to deals seen in the healthcare industry, says FBR's Christopher Rolland.
- Inversion deals allow U.S. companies buying foreign firms to see lower tax rates if less than 80% of the equity in the new company is owned by legacy U.S. shareholders, and the post-merger company has substantial foreign ops.
- Rolland thinks ARM (ARMH), NXP (NXPI), Mellanox (MLNX), and Taiwan's MediaTek could be among the foreign companies targeted by U.S. chipmakers. Worth noting: Mellanox sells more than just chips, and ARM's business model depends on the company maintaining a neutral status within the industry.
- Meanwhile, Nomura's Romit Shah names 15 potential M&A candidates, and divides them into 3 groups: "Sub-scale companies" with high margins and strong IP; "strategic companies" with compelling product lines; and "undervalued companies."
- Shah's "sub-scale companies:" IDTI, ISIL, MTSI, MCRL, SMTC, SLAB.
- "Strategic companies:" ALTR, AMCC, ATML, CAVM, MPWR, BRCM ($22.5B market cap could make it tough to digest).
- "Undervalued companies:" DIOD, IRF, MSCC.
Jun. 6, 2014, 2:27 PM
- Broadcom (BRCM +0.6%) has bought a unit of India's Ittiam Systems that specialized in improving Wi-Fi transfer speeds, the Economic Times reports.
- The purchase comes as Broadcom faces tougher competition in its Wi-Fi/Bluetooth/GPS combo chip business from Qualcomm and others, particularly in the low-end/mid-range smartphone market.
- The company still dominates the less cost-sensitive high-end segment, thanks in large part to major design wins with Apple and Samsung. Broadcom had an estimated 39% of the 2013 mobile connectivity market.
- Shares +19% on the week due to enthusiasm about Broadcom's planned baseband exit.
Jun. 2, 2014, 12:23 PM
- After opening up 13% on news it's weighing a sale or wind-down of its baseband chip unit, Broadcom (BRCM) has pared its gains a bit.
- One concern: Broadcom might little to nothing in a sale, given the baseband unit has been hemorrhaging cash and (as recently noted by CLSA) companies not named Qualcomm (QCOM +0.3%) or MediaTek have had a rough time turning a profit in the R&D-intensive business.
- Broadcom is only 9 months removed from paying $164M for Renesas' 4G baseband unit. Since then, the company has reportedly scored 4G design wins, but has also warned of top-line pressures caused by 3G weakness.
- Goldman notes Broadcom had only 4% of the 2013 baseband market (per Gartner), a tiny fraction of Qualcomm's 62%, and is set to lose share in 2014. The firm estimates Qualcomm gets a $0.02 EPS benefit for each percentage point it gains.
- Goldman adds Broadcom has noted its low-end/mid-range combo chip sales could be pressured as more functionality gets integrated with baseband ICs; the company had 39% of the 2013 mobile connectivity market to Qualcomm's 20%. Likewise, Wells Fargo sees a baseband exit hurting Broadcom's combo chip position.
- Texas Instruments, Freescale, and ST-Ericsson each wound up shutting down their baseband ops rather than selling them.
May 12, 2014, 7:55 AM
- TheMarker reports Quallcomm (QCOM) is in talks to buy Israeli chipmaker Wilocity for ~$300M. Wilocity is said to have given a notice of sale to employees.
- Wilocity, founded in 2007 by ex-Intel employees, develops chips and related firmware for the nascent WiGig (802.11ad) standard, which aims to act as an HDMI/USB alternative by enabling transfer speeds of up to 7Gbps between devices within 10 meters of each other (a much shorter range than Wi-Fi).
- The purchase would complement Qualcomm's Atheros Wi-Fi chip unit, which already has a partnership with Wilocity and has been grabbing share from Broadcom (BRCM) in the mid-range Wi-Fi/Bluetooth combo chip market - future combo chips with integrated WiGig seem likely.
- Broadcom, which still controls the high-end combo chip space, also backs WiGig, as do Intel, Marvell, and Nvidia.
Broadcom Corp is provider of semiconductors for wired and wireless communications. It provides a portfolio of SoCs that seamlessly deliver voice, video, data and multimedia connectivity in the home, office and mobile environments.
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