Network Chip Maker Broadcom Buys NetLogic for $3.7B

By Chris Preimesberger  |  Posted 2011-09-12 Print this article Print

NetLogic makes low-power-usage multicore embedded processors, mostly for content processing workloads. The company also has developed a line that features built-in network intelligence.

Networking chip maker Broadcom, which makes Bluetooth WiFi chips for iPhones and Samsung Galaxy tablet PCs, expanded its reach into the embedded systems market Sept. 12 when it revealed that it is acquiring NetLogic Microsysems for $3.7 billion in cash.

Broadcom said the transaction is expected to close in the first half of 2012. Terms of the deal netted $50 per share for NetLogic stockholders.

Santa Clara, Calif.-based NetLogic makes low-power-usage multicore embedded processors, mostly for content processing workloads. The company also has developed a line that features built-in network intelligence.

NetLogic also will augment Broadcom's catalog with some new product lines, including digital front-end processors for wireless base stations.

With the acquisition, Irvine, Calif.-based Broadcom is now better positioned to meet growing demand for integrated, end-to-end communications and processing platforms for network infrastructure, Broadcom CEO Scott McGregor said.

Analysts' Take

Jefferies & Co. analysts Mark Lipacis, Sundeep Bajikar and Rafi Hassan wrote in an advisory that "we believe that NetLogic is one of the fastest-growing semiconductor stocks in our coverage universe, and estimate sales at $514 million in 2012, which will significantly add to Broadcom's product portfolio.

"We view the acquisition as a positive, as we estimate it will add critical growth drivers and is accretive to both gross margins. NetLogic commands about 70 percent market share in knowledge-based processors and a small but growing share of multicore processors." 

On a conference call to analysts, journalists and stockholders, Broadcom reiterated its business outlook for the third quarter of 2011, saying that it expects revenue of between $1.9 billion and $2 billion.

Chris Preimesberger Chris Preimesberger was named Editor-in-Chief of Features & Analysis at eWEEK in November 2011. Previously he served eWEEK as Senior Writer, covering a range of IT sectors that include data center systems, cloud computing, storage, virtualization, green IT, e-discovery and IT governance. His blog, Storage Station, is considered a go-to information source. Chris won a national Folio Award for magazine writing in November 2011 for a cover story on and CEO-founder Marc Benioff, and he has served as a judge for the SIIA Codie Awards since 2005. In previous IT journalism, Chris was a founding editor of both IT Manager's Journal and and was managing editor of Software Development magazine. His diverse resume also includes: sportswriter for the Los Angeles Daily News, covering NCAA and NBA basketball, television critic for the Palo Alto Times Tribune, and Sports Information Director at Stanford University. He has served as a correspondent for The Associated Press, covering Stanford and NCAA tournament basketball, since 1983. He has covered a number of major events, including the 1984 Democratic National Convention, a Presidential press conference at the White House in 1993, the Emmy Awards (three times), two Rose Bowls, the Fiesta Bowl, several NCAA men's and women's basketball tournaments, a Formula One Grand Prix auto race, a heavyweight boxing championship bout (Ali vs. Spinks, 1978), and the 1985 Super Bowl. A 1975 graduate of Pepperdine University in Malibu, Calif., Chris has won more than a dozen regional and national awards for his work. He and his wife, Rebecca, have four children and reside in Redwood City, Calif.Follow on Twitter: editingwhiz

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