Broadcom Reportedly Talking With Avago About Buyout

A deal between Avago and Broadcom would add to a growing list of possible mergers in a fast-changing semiconductor market.

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Avago Technologies, which makes an array of computing components for such markets as wireless communications and enterprise storage, reportedly is in advanced talks to acquire chip maker Broadcom.

In a report May 27, the Wall Street Journal reported that it is looking to acquire Broadcom, adding to a consolidation trend within the semiconductor market. According to the news site, there is no indication when a deal could be made or what terms the two companies are discussing.

Officials with Broadcom and Avago are declining to comment on the report.

Avago came into the day with a market value of about $34 billion. According to Bloomberg, share prices for Broadcom spiked after news of a possible merger with Avago first came out, pushing its market value from about $28 billion to more than $32 billion.

Broadcom has been the subject of previous speculation regarding acquisitions. The company is among the largest maker of chips for mobile systems such as smartphones, tablets and wearables, Internet of things (IoT) devices and automotive technology products. Such capabilities could give Avago greater traction in fast-growing markets like IoT and mobile devices.

Broadcom announced last year that it was closing its baseband cellular chip business after being unable to gain inroads against such competitors as Qualcomm. The company had $8.4 billion in revenue last year.

The semiconductor space is seeing a lot of movement as vendors look to acquire other companies to fill gaps in their portfolios. Most recently, Intel reportedly has been in on-again, off-again talks to buy Altera, which makes field-programmable gate arrays (FPGAs) that are becoming increasingly important in server chips aimed at cloud and Web-scale compute environments. Intel is dominant in the flat PC space, and Intel is moving into growth areas. It also is expanding the capabilities of its server chips with accelerators like GPUs and FPGAs, which can be programmed through software.

When Altera reportedly broke off talks with Intel, news stories appeared speculating the Intel was turning its attention to Broadcom. However, Intel and Altera reportedly have resumed talks.

Earlier this year, NXP Semiconductors announced in March that it was 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.

Qualcomm, the top manufacturer of systems-on-a-chip (SoCs) for smartphones, is in a slightly different situation. Reports last month indicated that Qualcomm was 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. Jana Partners also want Qualcomm to cut expenses and increase stock buybacks, according to reports.

Qualcomm executives said in a statement that they would "continue to consider actions that are in the best interests of all stockholders."