Seeking Alpha
 

Avago Technologies Limited (AVGO)

- NASDAQ
  • Fri, Jul. 17, 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.
    | 7 Comments
  • Thu, Jun. 25, 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
    | 1 Comment
  • Thu, May 28, 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).
    | Comment!
  • Thu, May 28, 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)
    | 13 Comments
  • Wed, May 27, 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.
    | 8 Comments
  • Mon, May 18, 12:35 PM
    • Xilinx (XLNX +1.3%) is higher after the NY Post reported Intel and Xilinx FPGA archrival Altera have resumed buyout talks. Shares jumped in March after the first Intel/Altera report arrived.
    • Last week, Reuters reported Avago (AVGO +1.3%) has reached out to Xilinx, analog/mixed-signal chipmaker Maxim (MXIM +0.6%), and Japanese microcontroller/analog chipmaker Renesas (OTCPK:RNECF) about potential deals. Sources also state Avago has talked with P-E firm Silver Lake about partnering on a deal.
    • Avago has acquired LSI, PLX Technology, and Emulex over the last 2 years, and was previously reported to have bid for Freescale before the company agreed to merge with NXP. The company is one of many chipmakers taking part in a consolidation wave driven by both cost and product synergies.
    | Comment!
  • Thu, Mar. 19, 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.
    | 1 Comment
  • Wed, Mar. 4, 4:17 PM
    • Avago (NASDAQ:AVGO) held "advanced talks" to buy microcontroller/network processor/base station amplifier maker Freescale (NYSE:FSL) before the chipmaker agreed to a $16.7B deal with NXP (NASDAQ:NXPI), Reuters reports.
    • Avago reportedly got cold feet after Freescale's shares surged on an NY Post M&A report last month. However, sources state the company is "still looking for an acquisition that could be transformative."
    • Over the last 15 months, Avago has struck a $6.6B deal to buy LSI (it later sold parts of LSI to Seagate and Intel), a $309M deal to buy PLX Technology, and (most recently) a $609M deal to buy Emulex, expanding into a number of enterprise hardware markets along the way.
    • $31B worth of chip industry M&A deals took place last year, as chipmakers large and small try to reap cost and product synergies by merging with peers.
    • Avago rose 0.9% today to $129.40, leaving it close to Monday's all-time high of $130.87.
    | 2 Comments
  • Wed, Feb. 25, 4:48 PM
    • In tandem with its FQ1 results, Avago (NASDAQ:AVGO) announces it's buying Fibre Channel/Ethernet connectivity hardware maker Emulex (NYSE:ELX) for $609M net of cash and debt, or $8/share. The price represents a 26% premium to Emulex's Wednesday close.
    • The deal is expected to be funded with cash on hand, and to close in the second half of Avago's FY15 (ends Nov. 1). It's expected to be immediately accretive.
    • Avago is less than a year removed from buying LSI, whose product line includes RAID storage controllers, storage adapter cards, hard drive SoCs, and network processors. Much of Emulex's product line, which includes Fibre Channel and Ethernet adapter cards, Ethernet and storage controllers, and network monitoring hardware, is complementary to LSI's and/or services the same hardware OEMs.
    • Avago is up 5.3% AH to $118.64 following the acquisition news, its FQ1 EPS beat, and strong FQ2 revenue guidance. Emulex is up 24.8% to $7.94. Emulex archrival QLogic (NASDAQ:QLGC) is up 4% to $15.16.
    | Comment!
  • Aug. 13, 2014, 6:10 PM
    • Intel (NASDAQ:INTC) is buying Avago's (NASDAQ:AVGO) Axxia network processor unit for $650M in cash. The deal is expected to close in Q4.
    • The unit was obtained by Avago through the LSI merger. It had 2013 revenue of $113M, and employs 650 people.
    • The acquisition broadens Intel's product line within a competitive network processor market that also features Broadcom, Marvell, Cavium, and Freescale, among others.
    • The chip giant bought Ethernet switch processor startup Fulcrum Microsystems in 2011, and (thanks to the Fulcrum deal) counts data center switch vendor Arista Networks among its clients. The adoption of software-defined networking (SDN - shifts network intelligence to software-based controllers)  is expected to boost demand for off-the-shelf silicon relative to proprietary ASICs.
    • Notably, the Axxia line relies on ARM and IBM PowerPC CPU cores rather than x86 cores. However, the processors are often used in PCIe cards within servers running Intel x86 CPUs.
    • Back in May, Avago agreed to sell LSI's flash product unit to Seagate for $450M.
    | 14 Comments
  • Jun. 25, 2014, 6:22 PM
    • Black Sand Technologies, based out of Austin, was founded in '05 and has raised $28.2M in funding over its history.
    • Notably, the product page on Black Sand's site only shows 3G amplifiers, and the most recent PR on its news page is from 2012. All signs suggest Qualcomm (QCOM) is buying the company to strengthen its power amplifier IP and/or engineering talent, as it encroaches on the turf of established vendors such as Skyworks (SWKS), TriQuint (TQNT), RF Micro (RFMD), and Avago (AVGO) with system-level solutions.
    • Qualcomm, estimated to have 64% of the 2013 baseband processor market, made a dramatic entry into the amplifier market last year by announcing an RF front end solution (amplifiers included) that promised superior 3G/4G multi-band support and (via technologies such as envelope tracking) power efficiency. Skyworks, TriQuint, and RF Micro all tumbled following the announcement.
    | 9 Comments
  • Jun. 23, 2014, 7:19 AM
    • Avago (AVGO) has signed a definitive agreement to acquire PLX Technology (PLXT) for $309M. The agreement approved by each company's board of directors creates a tender offer for all PLX Tech common stock for $6.50 per share.
    | Comment!
  • May 29, 2014, 9:34 AM
    • Seagate (STX) is expanding its flash storage lineup - generally seen as a weakness as flash encroaches on hard drives - in a big way by acquiring LSI's PCIe server flash storage module/flash controller chip unit from new LSI parent Avago (AVGO) for $450M in cash.
    • Seagate, which already offers SSDs, notes the LSI unit is the #2 player in the PCIe flash market - Fusion-io (FIO +1%) is the largest - and that its offerings in the space are optimized for cloud/hyperscale deployments - Fusion-io also has a keen interest in this area. The unit's SandForce controllers have a number of SSD design wins.
    • Seagate expects its enterprise SSD and controller ops to produce at least $150M in revenue in FY15 (ends June '15), albeit with an op. margin headwind of $30M-$40M. Better profitability is expected in FY16.
    • The deal follows a string of flash storage acquisitions from archrival Western Digital: PCIe flash vendor Virident, SSD vendor sTec, and SSD caching software startup Velobit.
    • It appears to remove one more potential suitor for Fusion-io, long the subject of M&A speculation.
    | 3 Comments
  • Dec. 16, 2013, 8:41 AM
    • The trading halt is off for Avago Technologies and LSI Corp.with shares of both companies off to the races following Avago's $6.6B buyout of the semiconductor firm.
    • LSI +38.9% to $10.99 premarket, while Avago Technologie (AVGO) shoots 16.5% higher to $53.20.
    | Comment!
  • Dec. 16, 2013, 8:29 AM
    • The $6.6B purchase by Avago Technologies (AVGO) of LSI Corp. (LSI) is a big bet that the company can jump right into networking and storage chips while also realizing some synergies on the cost side.
    • LSI lands a deal price of $11.15 per share to mark heights that shares haven't seen since 2006.
    • Early analyst feedback on the deal is positive due to the complementary nature of the companies, but investors haven't had their say yet with Avago still halted on the Nasdaq.
    | Comment!
  • Dec. 16, 2013, 8:13 AM
    • Avago Technologies (AVGO) buys LSI Corp. (LSI) for $11.15 per share in a $6.6B all-cash deal.
    • The company says it will use a $4.6B term loan and an investment from Silver Lake Partners to raise the funds to buy LSI.
    • Trading in shares of both companies has been halted.
    | Comment!
Visit Seeking Alpha's
AVGO vs. ETF Alternatives
Company Description
Avago Technologies Ltd is engaged in manufacturing semiconductor products such as optoelectronics, radio-frequency and microwave components, and application-specific integrated circuits.