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Network chip maker Broadcom announced it has entered into a definitive agreement to purchase NetLogic Microsystems for $50 a share, making the deal worth approximately $3.7 billion and ranking as Broadcom's biggest acquisition to date. NetLogic is a fabless semiconductor company that specializes in high-performance processors for communication and media rich applications.
Broadcom's hefty cash investment is intended to beef up the company's infrastructure portfolio and sidestep having to develop its own complimentary chips for tasks like inspecting data packets and checking for security issues, according to The Wall Street Journal. By purchasing NetLogic, Broadcom CEO and President Scott McGregor believes his company effectively doubles its market opportunity.
"This transaction delivers on all fronts for Broadcom's shareholders -- strategic fit, leading-edge technology and significant financial upside," said McGregor. "With NetLogic Microsystems, Broadcom is acquiring a leading multi-core embedded processor solution, market leading knowledge-based processors, and unique digital front-end technology for wireless base stations that are key enablers for the next generation infrastructure build-out. Broadcom is now better positioned to meet growing customer demand for integrated, end-to-end communications and processing platforms for network infrastructure."
Analysts appear split on the deal. Some believe Broadcom overspent on a company that has mostly reported losses, while others point out that those losses are due to charges attached to past acquisitions, and that NetLogics is otherwise profitable.
Image Credit: Broadcom