Avago Technologies, a chip maker for wireless communications and corporate data storage devices is in advanced talks to purchase Broadcom Corp., one of their competitors, in a potential $35 billion deal. This follows the current trend in this market, which is currently rife with takeovers.
These talks also come during a time when large chip makers are showing weak revenue gains, and are therefore turning to acquiring other companies. Broadcom is one of these struggling companies. The Chief Executive of Broadcom was quoted in the Wall Street Journal article about this topic as follows: “It’s really economically difficult to be a small semiconductor maker now…. The larger companies are going to look for consolidation.” This appears to be just what is happening. This being the case, it sort of makes sense that companies like Avago and Broadcom, neither of which are completely dominant over their individual markets, would merge in order to compete with giants like Intel and Qualcomm.
Avago has been aggressively taking over companies in their industry for the last couple of years, though none of these acquisitions has been this big. In fact, a $35 billion deal would be bigger than the total of all of their acquisitions since 2013, which have come to about $8 billion. It seems that their taking what has been working for them and now doing it on a much larger scale – over that same time period they’ve increased their market cap by over $25 billion and their stock has risen by more than 40%.
Scott McGregor, the previously quoted Chief Executive had another interesting quote in the same article. “About six months ago I said in five-to-10 years, half of the companies we know today won’t exist anymore…. And it’s pretty solid on that track.” Whether his prediction proves to be exactly correct is still to be seen, but what is certain is that the market place will look different.
from Sarang Ahuja http://ift.tt/1JfuhSj