What will Avago do with Broadcom once it has completed the $37 billion acquisition to form a monster networking and storage chip vendor?
That's the question that Simon Stanley, Heavy Reading contributing analyst and networking components expert, immediately asked when news of the proposed Avago Technologies Pte. acquisition broke Thursday morning. (See Avago Seals Deal to Buy Broadcom for $37B.)
"They're both in storage and networking but on the face of it there isn't much overlap in products -- it's going to be a giant company," Stanley tells Light Reading.
"What is intriguing, though, is what Avago will do with Broadcom. Avago bought LSI not so very long ago and then offloaded a lot of it" to Intel Corp. (Nasdaq: INTC) and Seagate Technology LLC (Nasdaq: STX), he notes. (See Avago to Buy LSI for $6.6B, Bit Parts: Following the Optical Money, Intel ARMs Itself for IoT, SDN Opportunities and Seagate to Acquire LSI's Flash Business from Avago.)
"So the big question is whether the long-term plan will be to hang on to some parts of Broadcom's business and look to sell others. It might see some parts of Broadcom as a good fit and others not so much, but we'll have to wait and see," Stanley adds.
The analyst believes that Broadcom Corp. (Nasdaq: BRCM)'s unsuccessful foray into the mobile baseband components market, which led to the closure of that business and a costly restructuring program, may have been a catalyst for the sale announced today.
"I wouldn't have thought that Broadcom would have needed to look to be acquired but it did take a big hit with its mobile write-off," notes the analyst.
— Ray Le Maistre, , Editor-in-Chief, Light Reading