In announcing the $50-per-share deal, Broadcom noted that the buy would boost its product line with "a number of critical new product lines and technologies, including knowledge-based processors, multi-core embedded processors, and ... unique digital front-end technology for wireless base stations." (See NetLogic Ships XLP, NetLogic Goes to 64 Cores, NetLogic Advances XLP Family, NetLogic Gets 500th Patent and NetLogic Mashes It Up.)
NetLogic's processors are used by original equipment manufacturers (OEMs) to build 3G and Long Term Evolution (LTE), data center, metro Ethernet and IP infrastructure products such as switches, routers, mobile base stations, storage and security appliances and service gateways. (See ZTE Uses NetLogic for IPv6, NetLogic Goes Into ZTE's LTE, NetLogic Enters Network Storage, NetLogic Scores LTE Wins, NetLogic Adds Base Station Processors, NetLogic Targets 40G Backplanes, Advantech, NetLogic Do 40G ATCA and DoCoMo Picks NetLogic's Multicore.)
The two companies expect the merger to close during the first half of 2012.
Why this matters
In the official statement announcing the deal, Broadcom CEO Scott McGregor said that the merger would leave the chip giant "better positioned to meet growing customer demand for integrated, end-to-end communications and processing platforms for network infrastructure."
Broadcom expects NetLogic to boost its non-GAAP earnings in 2012 by $0.10.
While NetLogic may be adding important products to Broadcom's portfolio, its impact on its annual revenues and bottom line will be less substantial. NetLogic reported 2010 full-year revenues of $381.7 million and a net loss of $66.4 million (though after one-time items the company's 2010 non-GAAP net income was $107.4 million). Broadcom, meanwhile, reported 2010 revenues of $6.82 billion and net income of $1.08 billion.
Not surprisingly, NetLogic's share price is up by 50.6 percent to $48.07 in pre-market trading Monday morning.
However, investors and analysts may wonder if Broadcom is paying over the odds. NetLogic's share price ended Friday at $31.91, giving it a market value of $2.2 billion. That means Broadcom's $50-per-share offer represents a 57 percent premium over Friday's closing price.
In pre-market trading Monday morning, Broadcom's stock was down by 1.3 percent at $33.00.
For more on Broadcom, see the following new items:
- Broadcom Takes Its DTA Silicon Global
- Broadcom Crafting PON-Speed HFC
- Broadcom Teams Ethernet With Fibre Channel
- Broadcom Plays Foundry to AlcaLu
- AlcaLu, Broadcom Unveil Integrated Femto Design
- Broadcom's Ethernet Club Revealed (Sort of)
- Broadcom Integrates Mobile Backhaul
- Broadcom Makes Smartphone Moves