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    Avago Buying Broadcom in Latest Chip Industry Deal

    Written by

    Jeff Burt
    Published May 29, 2015
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      Avago Technologies is buying fellow chip maker Broadcom for $37 billion in a deal that continues a consolidation trend in the semiconductor industry.

      A day after reports surfaced that Singapore-based Avago was pursuing Broadcom, the two vendors on May 28 announced the deal that will create a combined $77 billion company that officials hope will be better positioned to compete with the likes of Intel, Qualcomm and Samsung in a market that includes smartphones, tablets and the myriad devices for the rapidly growing Internet of things (IoT).

      The new company, which has combined annual revenue of about $15 billion, will carry the name Broadcom Ltd., and the deal is expected to close in the first quarter next year. Once the acquisition is complete, Hock Tan, president and CEO of Avago, will serve in the same positions with the new combined company. Henry Samueli, Broadcom co-founder, CTO and chairman, will be the new company’s CTO and will join its board of directors.

      The boards of both companies have unanimously approved the deal.

      “Today’s announcement marks the combination of the unparalleled engineering prowess of Broadcom with Avago’s heritage of technology from [Hewlett-Packard], AT&T, and LSI Logic, in a landmark transaction for the semiconductor industry,” Tan said in a statement. “The combination of Avago and Broadcom creates a global diversified leader in wired and wireless communication semiconductors.”

      The acquisition is the latest consolidation move by chip makers as they look to quickly broaden their capabilities in a fast-changing and increasingly mobile world. Intel officials, who are continuing their efforts to broaden the vendor’s reach beyond its core PC business and into growth areas like mobile devices and the IoT, reportedly is pursuing Altera, a company that makes field-programmable gate arrays (FPGAs) that are becoming increasingly important in cloud and Web-scale environments. FPGAs can be programmed through software and used as accelerators to improve system performance while keeping power consumption down.

      The two companies reportedly resumed talks earlier this month after negotiations broke off over a disagreement about the price.

      NXP Semiconductors in March announced it is buying Freescale Semiconductor for about $12 billion in a deal that would create a larger company with combined annual revenue of more than $10 billion. In addition, Qualcomm, the top manufacturer of systems-on-a-chip (SoCs) for smartphones, said in October it is expanding its efforts around the Internet of things by buying British chip maker CSR for $2.5 billion.

      CSR’s expertise includes Bluetooth technology, automotive infotainment and indoor location, all of which will become increasingly important in the IoT.

      “The addition of CSR’s technology leadership in Bluetooth, Bluetooth Smart1 and audio processing will strengthen Qualcomm’s position in providing critical solutions that drive the rapid growth of the Internet of everything, including business areas such as portable audio, automotive and wearable devices,” CEO Steve Mollenkopf said in a statement at the time.

      At the same time, Qualcomm reportedly is being pressured by activist investor Jana Partners to separate its chip business from its patent-licensing unit as part of a larger push to grow the company’s stock price, change how executives are paid and return more money to its shareholders.

      Broadcom President and EO Scott McGregor said that through the Avago acquisition, “our customers will gain access to a greater breadth of technology and product capability.”

      Jeff Burt
      Jeff Burt
      Jeffrey Burt has been with eWEEK since 2000, covering an array of areas that includes servers, networking, PCs, processors, converged infrastructure, unified communications and the Internet of things.

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