Broadly Comtent

Broadcom and Symantec agree to a major tie-up

Image source: Hari Syahputra - Shutterstock

What's going on?

Broadcom confirmed one of 2019’s biggest tech tie-ups late last week: the American chipmaker’s buying the non-consumer business of security software firm Symantec for $11 billion.

What does this mean?

Mergers and acquisitions have been a key part of Broadcom’s growth strategy to date. But last year, its long-running bid to buy rival Qualcomm in a near-$120 billion deal was blocked by the US for national security reasons: Broadcom was headquartered in Singapore at the time. So the semiconductor giant decided to get into software instead.

Broadcom announced last July that its first big software purchase would be CA Technologies – a business infrastructure firm. And it’s now followed that up with Symantec’s corporate branch, which provides cyber defense, cloud security, and data loss backup services to everyone from big banks to Oxford University. Broadcom had wanted to pick up the company’s consumer-facing business too – which includes everyone’s favorite Norton antivirus software – but Symantec put up a firewall, effectively splitting itself in two.

Why should I care?

For markets: Investors do the computer worm.
At the time of the CA acquisition, investors sent Broadcom’s stock price down 15%: they were concerned about the company stepping into uncharted territory. But the value of Broadcom’s shares, already up in anticipation of the Symantec deal, increased 3% on Friday as investors toasted the $1 billion of cost savings expected within a year. They might’ve done even better, but chip stocks in general were dragged down by yet more trade war worries on Friday…

The bigger picture: Buyer beware.
The US government’s ongoing blacklisting of China’s Huawei – one of Broadcom’s biggest microchip customers – contributed to the semiconductor company’s decision to cut its annual sales forecast back in June. With smartphone sales also down at clients Apple and Samsung, getting deeper into software should allow Broadcom to better predict its future revenue and profit – even if it means taking over a somewhat troubled company. Just nobody tell them how that’s worked out for Bayer.

Originally posted as part of the Finimize daily email.

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