By Dana Mattioli, Dana Cimilluca and Shayndi Raice
Broadcom Corp. is in advanced talks to be bought by Avago
Technologies Ltd., in what would be the latest in a recent string
of mergers in the semiconductor industry.
It isn't clear what terms the companies are discussing or when a
deal could be inked--if there's one at all--but Broadcom had a
market value of $28 billion as of Wednesday afternoon. Avago's was
about $34 billion.
Following The Wall Street Journal's story on the talks, shares
of Broadcom closed up 22% to $57.13, while Avago gained 7.8% to
$141.49.
Broadcom, based in Irvine, Calif., makes chips for about half of
the world's tablets and smartphones. The company counts Amazon.com
Inc., Apple Inc. and DirecTV as customers, according to its
website. Broadcom had $8.4 billion in sales in 2014.
Avago designs, develops and supplies analog, digital and mixed
signal chips geared toward the wireless-communications and
enterprise-storage markets, according to its website. The company
was founded in 1961 and is based in San Jose, Calif., and
Singapore.
The semiconductor sector has been consolidating at a fast clip
this year. In March, NXP Semiconductors NV agreed to buy Freescale
Semiconductor Ltd. in an $11.8 billion deal. Intel Corp. is in
talks to buy Altera Corp., which has a $14 billion market value.
Meanwhile, Qualcomm Inc. has come under pressure from activist
investor Jana Partners LLC, which is pushing the chip giant to
pursue a breakup, among other actions.
In Broadcom, Avago would gain a company with a dominant position
in many kinds of communications chips, including chips for Ethernet
networking devices, Wi-Fi chips for smartphones and personal
computers, and modems used by cable and telecom companies to
deliver broadband Internet access.
But the company never boasted the kind of proprietary
intellectual property that chip makers like Intel and Qualcomm have
used to fence off competitors. Broadcom, its executives admit, has
prospered largely by exploiting technologies that became industry
standards at a rapid rate, updating its products steadily to keep
pace.
The company also has engaged in considerable acquisition
activity of its own to expand its product line, including a $3.7
billion deal in 2011 to buy Netlogic Microsystems Inc.
Broadcom was co-founded in 1991 by a team led by engineers Henry
Samueli, who remains chairman and chief technology officer, and
Henry Nicholas, a former CEO who stepped down in 2003. Mr. Nicholas
held about 25% of Broadcom's voting shares as of the end of March,
according to the company's most recent proxy statement. Mr. Samueli
held about 22%.
--Don Clark contributed to this article.
Write to Dana Mattioli at dana.mattioli@wsj.com, Dana Cimilluca
at dana.cimilluca@wsj.com and Shayndi Raice at
shayndi.raice@wsj.com
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