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Date: 30-05-15

Avago to acquire Broadcom: really a wide and broad comm semiconductor co.

Avago to acquire Broadcom for approximate US$37 Billion ( $17 billion in cash and equity valued at approximately $20 billion). This acquisition creates a big communications semiconductor company covering from the fibre-optic high-speed communication semiconductor devices to IOT enabling Bluetooth wireless transceivers. There is no such semiconductor company at present in the world which can match this level of breadth and depth in communications semiconductor offerings of this combined business. Qualcomm and Marvell faces a stronger competition from this newly agreed acquisition.

Except for the cellular communication related SoC IC products, from cloud communications to IOT communications there is hardly any key missing links in the combined business of Avago and Broadcom. The combined business is capable of designing SOC chips from servers to mobile devices including wearables and IOT systems. Broadcom also brings its set-top box capabilities to the combined business.

The combined value of the company is pegged at $77 billion in enterprise value. Actually Avago is smaller company by revenue compared to Broadcom. Broadcom is already in the top-10 semiconductor vendor list, whereas Avago is estimated to be 12th largest semiconductor company.

The total revenues of combined business is estimated at $15 billion making it somewhere a sixth or seventh largest semiconductor company in the world most probably little up or down around Hynix and Toshiba.

Avago was formed after acquiring semiconductor business of Agilent (a HP spin off) , and later acquired LSI, which had acquired Agere systems(a semiconductor spin-off of Lucent with AT&T routes). If you look at the Broadcom, the company has grown into the present size from a start-up founded inside a garage. Broadcom's phenomenal growth synced with dot com boom and grew from opportunities in high-speed digital subscriber line market. Broadcom also benefited from the wireless boom. But somehow Broadcom did not grow the way Qualcomm has grown in the cellular/mobile communication domain.

Hock Tan, President and Chief Executive Officer of Avago, to continue as President and Chief Executive Officer of the combined company, which going to keep the name as Broadcom. Dr. Henry Samueli, Co-Founder, Chief Technical Officer and Chairman of the Board of Broadcom to join the board of the combined company and head as Chief Technology Officer of the combined company. Another founder of Broadcom Henry Nicholas is given a strategic advisory role within the combined company, reporting to Mr. Tan.

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