Avago to buy Broadcom for $37B in biggest-ever chip deal
This summarizes the deal:
>As of 2014, Broadcom had $3.13 billion of cash and cash equivalents held by its foreign subsidiaries, and it deferred about $4.85 billion in tax on un-repatriated foreign earnings, according to SEC filings. Selling to a Singapore-based firm will free the foreign cash and help eliminate potential U.S. tax liabilities.
F. You. The deal is predicated on avoiding paying US taxes. "I know we built our business on the luxury of a developed western nation that provided ample education for our founders, but we'd like to avoid actually paying for that luxury now, because we no longer benefit from it." I hope the USJD bends them over a barrel on the taxation before this is allowed to close. But who am I kidding, green light baby! Let it burn!
Just from my own experience, when LSI was bought up by Avago, a lot of the LSI guys around here complained that it was a rather rough transition. Avago seems to like buying up companies like this and piecing them out, like how a lot of LSI's storage controller related assets were sliced off and sold to Seagate after being acquired by Avago; I'm not sure if this is a good thing for Broadcom.
I wonder how this will affect the Raspberry Pi foundation. They use Broadcom SoCs and seem to have a pretty good relationship with them.
TIL (I think?): Avago is the spun-off semiconductor division of Agilent, plus LSI and Emulex (minus, it seems, all the parts of those businesses that don't produce chipset products).
I think? this makes Avago the largest chipset vendor.
Does anyone know what Avago's attitude towards Open Source is? Any chance we might get some decent drivers for Broadcom gear?
The reason for the deal: as the WSJ noted yesterday, "growth has been hard to come by for Broadcom, a 24-year-old company that makes communications chips for tablets and smartphones, and supplies the Internet links for cable-television and telecommunications devices." As to why Avago is likewise excited to close the deal, "Avago has been likened to health-care companies such as Valeant Pharmaceuticals International Inc. that are based in foreign tax jurisdictions and also have become voracious acquirers." So Broadcom is merely the latest "notch on the bedpost", funded with billions in new debt.
The press release also mentions $750 million "synergies" in the next 18 months which should translate to about 2000-3000 layoffs.
They note the mobile chips - but those are sold cheap.
More importantly is the fact that Broadcom's switch chips have pretty much become the de-facto chipsets used in data center switches from most vendors. They are quickly becoming the Intel of DC switches. And these chips, are not so cheap (though true, there are fewer of them, but the margins are much more attractive).
The number of large semiconductor acquisitions in the past year has been pretty insane... just further consolidation with very few new semi startups coming out.
iANAL, but isn't this another case of tax inversion[0]?
Singapore does not tax profits generated outside of its borders (unless repatriated).
First Motorola, Freescale, now Broadcom, who will be the next?
Marvell? or AMD? The latter is really cheap though.
World is changing so fast these days. Will USA be left with companies like Facebook/Twitter and we will all end up doing social-activities using devices invented/made elsewhere and feel great about them?
The story of Henry Nicholas, Broadcom's co-founder : http://www.vanityfair.com/news/2008/11/nicholas200811
Well, that is interesting. I wonder how much R&D will continue and in particular what happens to Gottfried Ungerboeck (inventor of trellis modulation). This will be interesting to watch.
Used to intern for them in the summer of 2008. Always felt the good times had passed (early 2000s) with Qualcomm as their arch nemesis.
I wonder if the US government will be okay with such a large chipmaker to be owned by a Singapore company. Historically, they haven't been too keen on exporting chip tech.
If Qualcomm is on the table, it seems more likely to be approved.
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IANAAnalyst, but the company with probably the most components in devices in the entire world is being sold for about 1.6x what WhatsApp went for? Crazy times.
just started dealing with avago a few weeks ago, before that had never heard of them. seems like they do a lot of buy and splits to get the really profitable/strategic pieces and sell of the remainders
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