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Rumor: Is Broadcom Buying Agere?

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Agere Systems Inc. (NYSE: AGR.A) stock is getting a boost today from rumors that Broadcom Corp. (Nasdaq: BRCM) is considering an acquisition of the troubled chip firm.

A Broadcom acquisition seems to be a longshot bet, but it was enough to push Agere's stock up $0.18 (17 percent) to $1.26 by this afternoon.

Agere participates in a few markets that Broadcom doesn't, most notably chips for hard disk drives. And Agere could push Broadcom further into the telecom space with physical-layer chips, network processors, and switch fabrics. But Agere also overlaps Broadcom in two areas where Broadcom doesn't need much help: cell phone chips and wireless LANs.

Overall, analysts don't see much reason for Broadcom to absorb a company with a $2 billion market capitalization and a recent history of struggles. Agere is on the defensive, having disappointed in consecutive quarters due in part to a 3G handset rollout that just refuses to happen (see Agere Suffers Hutch Hiccup and Agere Stung by 3G (Again)).

A merger "would not make sense from the financial point of view, in terms of the impact it would have on Broadcom's valuation," says Dushyant Desai, an analyst with CE Unterberg Towbin. "It's better for Broadcom to compete with and maybe displace Agere."

Analysts were cheered recently by Agere's initiation of some cost-cutting efforts. Agere recently announced it would cut 500 jobs from its roster of 6,600. Another 600 will go if a buyer can't be found for Agere's Orlando fab, which the company pledges to close by the end of December 2005 (see Agere Wields Jobs Axe). Agere separately plans to close offices in Maine, New Jersey, and the Netherlands.

— Craig Matsumoto, Senior Editor, Light Reading

For more info on the state of industry financials, check out the coming Light Reading Live! event:

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User Rank: Light Beer
12/5/2012 | 1:12:44 AM
re: Rumor: Is Broadcom Buying Agere?

Analysts were cheered recently by Agere's initiation of some cost-cutting efforts. Agere recently announced it would cut 500 jobs from its roster of 6,600.

How callous!! Hope they can be cheered just as easily when they lose their own jobs.

Welcome to capitalism
User Rank: Light Beer
12/5/2012 | 1:12:44 AM
re: Rumor: Is Broadcom Buying Agere?
One of the two is a very smart guy, the other one should be washing the Ferraris in the parking lot. Heaven help the Broadcom guys if this is his idea.
User Rank: Light Beer
12/5/2012 | 1:12:42 AM
re: Rumor: Is Broadcom Buying Agere?
So which was is the Ferrari owner and which one is the washer? FT or BR?
User Rank: Light Beer
12/5/2012 | 1:12:41 AM
re: Rumor: Is Broadcom Buying Agere?
This is more than a rumour, insiders at Agere have been buying heavily for the last two months, expect a 2.50/share offering. A 2B offering for 1B+ sales per year company is quite reasonable.

User Rank: Light Beer
12/5/2012 | 1:12:40 AM
re: Rumor: Is Broadcom Buying Agere?
I am sure that ultimately, he will do for Broadcom what he did with the Modem Biz
Big Time
Big Time,
User Rank: Light Beer
12/5/2012 | 1:12:39 AM
re: Rumor: Is Broadcom Buying Agere?
Not sure I see the math straight on this. With roughly 1.7B shares outstanding, doesn't that price a 2.50 offering at ~4.25B?
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