Avago Technologies (NASDAQ: AVGO)
Semiconductor giant Avago Technologies announced that it would be acquiring Broadcom Corp (NASDAQ: BRCM) in a mix of cash and stock for a total value of 37 Billion. This deal will combine two powerhouses in the semiconductor space which will supply everything from smart phones to cloud computing to highly technical electrical switching devices.
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Chief Executive Officer of Avago, Hock Tan noted, “Avago has established a strong track record of successfully integrating companies onto its platform. Together with Broadcom, we intend to bring the combined company to a level of profitability consistent with Avago’s long-term target model.”
Analysts on Avago
Pacific Crest analyst John Vihn had comments about the pricing of the deal; “We estimate fair takeout valuation for Broadcom at $60 per share, or 4.2x EV/sales, which is a slight premium over the group average of 4.0x. At $60, we estimate Broadcom would add $1.56 to our C2016 EPS estimate of $8.93 for Avago.”
Pacific Crest remains Overweight on AVGO with a $135 price target.
This blockbuster deal in the semiconductor space is yet another merger consolidating companies to cut costs an increase market share. Together, these two companies can save huge capital expenditures as many synergies exist in reaching an end product.
Avago Technologies Limited designs, develops, and supplies semiconductor devices with a focus on analog III-V based products. The company operates through four segments: Wireless Communications, Wired Infrastructure, Enterprise Storage, and Industrial & Other segments. Its product portfolio comprises RF power amplifiers, RF filters, RF front end modules, ambient light sensors, proximity sensors, low noise amplifiers, multimarket-wave mixers, diodes, fiber optic transceivers, serializer/deserializer ASICs, and optical laser and receiver components. The companys products also include read channel based system-on-chips, preamplifiers, serial attached SCSI and redundant array of independent disks controllers and adapters, custom flash controllers, industrial fiber optics, optocouplers, motion control encoders and subsystems, and LEDs. Its products are used in smartphones, hard disk drives, computer servers, consumer appliances, data networking and telecommunications equipment, enterprise storage and servers, and factory automation and industrial equipment.- Yahoo! Finance
Broadcom Corporation provides semiconductor solutions for wired and wireless communications. Its products offer voice, video, data, and multimedia connectivity in the home, office, and mobile environments. The company operates in two segments: Broadband and Connectivity, and Infrastructure and Networking. The Broadband and Connectivity segment offers platform solutions for cable, satellite, Internet protocol, over-the-top, and terrestrial set-top boxes; DSL, cable, and fiber broadband access services; femtocell to enhance cellular coverage and small cell low-powered radio access nodes, as well as location-based services technology and touch controllers; and integrated and discrete Wi-Fi, bluetooth, and near field communication solutions. – Yahoo! Finance