The chip maker Avago Technologies is in serious discussions to acquire its fellow chipmaker Broadcom Corp in a cash-and stock deal worthy of $37 billion.
Singapore-based Avago Technologies makes semiconductors for use in smartphones and corporate-data-storage markets. It was previously a semiconductor unit of Hewlett-Packard. Operating in California and Singapore, it reported $4.3 billion in sales in one year last November. Broadcom is an American chipmaker that makes mobile communication chips that are installed in Apple and Samsung phones. Initially specialized in digital computer networking semiconductors and grew into various other communication chips, that are used in smartphones, HD televisions and Wall Street supercomputers. The company earned $1.41 billion last year but has been struggling to push up sales. Its growth in revenue was a mere 1.5%.
The talks on the deals come as technology stocks are surging and investors on Wednesday pushed the Nasdaq Composite Index up to a record closing high. The large chip makers are looking at acquisitions as an answer to push up their anemic revenue gains. This deal consists of $17 billion in cash and the equivalent of about 140 million Avago shares.
Though both the companies design chips, they overlap very little products as Avago focuses more on fiber-optic lines and Broadcom focuses on TVs and smartphones. But merging both the companies, the company could offer comprehensive products to big communications companies in the same time negotiating cheaper manufacturing costs from the third-party factories where the chips are made.
Avago has been an active acquirer in recent times, with the acquisition of five companies since 2013. Its recent acquisition was that of Emulex, a company dealing with networking equipments and services.