- Broadcom is reportedly looking into buying Symantec for more than $15 billion
- These are the details behind the potential deal.
In November 2017, Broadcom had proposed to buy Qualcomm for $130 billion, but the Trump administration blocked the deal citing national security concerns. About eight months later, Broadcom CEO Hock Tan decided to make an aggressive software play with the acquisition of CA Technologies for a reported $18.9 billion. And now rumor has it that Broadcom may aggressively pursue an acquisition of cybersecurity software company Symantec for more than $15 billion. According to CNBC, the talks between Broadcom and Symantec are advanced.
What if a deal with Symantec does not happen? Broadcom may reportedly turn to acquire Tibco. Vista Equity Partners bought Tibco for $4.3 billion in 2014. And Bloomberg had reported that Vista was considering a sale of Tibco last year. And there have been different sets of Broadcom advisors working on both deals at the same time because Tan wants to make at least one big deal happen by the end of the year.
Running a number of software companies would be a significant shift for Broadcom, which has been relying on large buyers of processors for the majority of its revenue.
Apple accounts for about 13% of Broadcom’s revenue through its suppliers, which is down a few percentages from the previous year. And the top five customers make up a bit more than 30% of the company’s revenue. As there has been uncertainty around its business with Huawei, the need for Broadcom to diversify is becoming increasingly important. Huawei was blacklisted from buying U.S. equipment without permission in May.
During the second-quarter earnings call last month, Tan pointed out that the U.S./China trade conflict including Huawei’s export ban has been creating “economic and political uncertainty.” As a result, Broadcom’s demand volatility increased and its customers are “actively reducing inventory levels to manage risk.”
Broadcom recently split its company into three divisions including semiconductor solutions, infrastructure software, and IP licensing. The acquisition of CA helped strengthen the infrastructure software unit at the company.
Analysts have been skeptical about Symantec’s stability due to the constant shuffling in the company’s management. For example, Symantec’s former CEO Greg Clark resigned in May, only three years into the job. And that was only four months after finance head Nicholas Noviello stepped down. And Clark is Symantec’s fourth CEO in seven years. As a result, the stock price of Symantec dropped over 10% from two years ago.
In a note to investors, Piper Jaffray’s senior research analyst of semiconductors Harsh Kumar believes that an acquisition of Symantec would be a great move for Broadcom. “Symantec would make a perfect fit for the Broadcom portfolio,” wrote Kumar via Bloomberg. And Kumar compared it to work out potentially as well as the CA acquisition. Currently, Symantec provides products and services to more than 350,000 organizations and 50 million people.
If the deal goes through, then it would likely be compared to Intel’s acquisition of McAfee for $7.7 billion. Intel was intending to integrate McAfee’s software into its PC processors, but that strategy did not pan out. So Intel sold off McAfee to TPG for $4.2 billion.
Tan became CEO of Broadcom after he drove Avago Technologies’ $37 billion acquisition of Broadcom in 2015. The combined companies had assumed the name Broadcom. Broadcom was originally based in Singapore, but then the company relocated its headquarters to the United States.
“Broadcom’s approach to M&A is to deliver high cash on cash returns, which it has been quite successful in achieving,” added Morgan Stanley analyst Craig Hettenbach in a report via Bloomberg. “In semiconductors, the company was early and led the wave of consolidation seen across the industry. However, with many assets already off the board and remaining companies trading at high valuation multiples, the opportunity set in semis is much lower today.”
Symantec was originally founded in 1982. And its most popular software is called Norton Antivirus. Recently, Symantec acquired LifeLock for $2.3 billion and Blue Coat for $4.65 billion in 2016.
