Network Chip Maker Broadcom Buys NetLogic for $3.7B

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.