The semiconductor chip industry has been dealing with all kinds of problems even back in 2020. The pandemic coupled with continued supply issues has led to a chronic shortage of chips which has affected a number of industries, especially the auto sector. While some chip companies are doubling down on the market, other’s are trying to diversify. Semiconductor giant Broadcom (NYSE: AVGO) announced earlier that it planned to buy out software firm SAS Institute for as much as $20 billion. Now it seems like Broadcom is giving up on the planned buyout after all.
News first broke on Monday that the chipmaker is considering buying out the software giant SAS Institute in a bid to diversify the business. SAS sells analytics and business-related software. Although Broadcom is primarily a chipmaker, it does have a smaller suite of software products aimed at B2B clients. In this respect, the proposed SAS acquisition could have complemented Broadcom quite well.
However, news broke on Tuesday that SAS’ CEO and majority owner, Jim Goodnight, said the company is not for sale. Unlike most public companies, SAS Institute remains primarily owned by its two founders, who started the company back in the 1960s. Since then, the software giant has remained consistently profitable.
“I can confirm that Dr. Goodnight sent a message to all employees in which he said ‘We are not up for sale.’ SAS remains focused on furthering innovation to serve our customers,” said a SAS spokesperson in a statement late Tuesday afternoon.
Many analysts were quite optimistic about a Broadcom-SAS deal, with some saying that the two companies would have complimented each other quite well. Broadcom largely built itself due to its history of past acquisitions. The chipmaker’s CEO, Hock Tan, said earlier this year that if it couldn’t make a major buyout sometime in 2021, it would instead use that money on stock buybacks as well as paying back debt.
Even if the deal did go through, there’s a chance that it could be overruled by antitrust regulators. While Broadcom isn’t as frequently called out amongst the big tech crowd, the company still would be a potential target of the new Biden executive order, which authorized federal regulators to reign in the power of these growing tech companies. This includes forcibly breaking up past acquisitions as well.
Shares of Broadcom didn’t really move much in response to the news. In general, a company’s stock tends to dip a bit if it confirms a major acquisition, while the target tends to see a jump in its stock.
Broadcom Company Profile
Broadcom–the combined entity of Broadcom and Avago–boasts a highly diverse product portfolio across an array of end markets. Avago focused primarily on radio frequency filters and amplifiers used in high-end smartphones, such as the Apple iPhone and Samsung Galaxy devices, in addition to an assortment of solutions for wired infrastructure, enterprise storage, and industrial end markets. Legacy Broadcom targeted networking semiconductors, such as switch and physical layer chips, broadband products (such as television set-top box processors), and connectivity chips that handle standards such as Wi-Fi and Bluetooth. The company has acquired Brocade, CA Technologies, and Symantec’s enterprise security business to bolster its offerings in infrastructure software. – Warrior Trading News
