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Broadcom is said to be in advanced talks to acquire Symantec

Broadcom bids 130 billion USD to buy Qualcomm, San Jose, USA - 06 Nov 2017
Outside the Broadcom office in San Jose.
(John G. Mabanglo / EPA / Shutterstock)

Broadcom Inc. is in advanced talks to buy cybersecurity firm Symantec Corp., according to people familiar with the matter, seeking a further expansion into the more profitable software business.

San Jose-based Broadcom could reach an agreement to buy Symantec of neighboring Mountain View within weeks, said the people, who asked not to be identified because the matter isn’t public. No deal has been finalized and the talks could fall through, the people said.

A representative for Symantec declined to comment. A representative for Broadcom didn’t immediately respond to a request for comment.

Symantec’s shares rose 13.6% to $25.10 on Wednesday. They closed Tuesday at $22.10, giving the company a market value of about $13.7 billion. Broadcom shares slipped about 3.5%. They closed at $295.33 on Tuesday, giving the semiconductor maker a market value of about $118 billion.

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The deal would mark Broadcom’s second big bet in software, following its $18-billion takeover last year of CA Technologies. That transaction spurred some investors to express concern that Broadcom Chief Executive Hock Tan’s acquisition strategy was being extended too far after playing a key role in consolidating in the $470-billion chip industry.

That deal also came after Broadcom abandoned a hostile pursuit of rival chipmaker Qualcomm Inc., when President Trump blocked the transaction, citing national security risks.

Some analysts saw the potential purchase of Symantec as a positive for Broadcom.

“Symantec would make a perfect fit for the Broadcom portfolio,” Harsh Kumar, an analyst at Piper Jaffray, wrote in a note to investors. He said the situation is similar to Broadcom’s CA acquisition, “which ultimately turned out to be extremely successful under the Broadcom umbrella.”

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Symantec is the world’s biggest maker of cybersecurity software, providing products and services to more than 350,000 organizations and 50 million people, according to its annual report.

The company has faced a list of challenges in the last year, grappling with heightened competition, the abrupt departure of its CEO, waning consumer interest in antivirus programs and a financial investigation that ended with restated earnings. The shares have gained about 17% this year, recovering from a 33% slump in 2018.

Activist investor Starboard Value won three Symantec board seats in September.

Broadcom wouldn’t be the first chipmaker to try a foray into security software. In 2011, Intel Corp. acquired McAfee Inc. for $7.7 billion. Intel’s plan was to hard-wire some of the software’s capabilities into its market-leading personal computer processors. The semiconductor maker was never able to pull that off, and ended up spinning off the unit in 2016 in a sale to TPG that valued the business at $4.2 billion.

Under Tan, Broadcom has pursued a different strategy for software. Tan said he acquires “franchises,” groups or businesses within companies that have sustainable market positions through technology leadership. He then invests in them to maintain that leadership, running them as distinct parts of Broadcom, rather than integrating the acquired products.

“Broadcom’s approach to M&A is to deliver high cash on cash returns, which it has been quite successful in achieving,” Morgan Stanley analyst Craig Hettenbach wrote in a report this week. “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.”

Baker, Hammond, Porter and King write for Bloomberg. With assistance from Bloomberg writer Dinesh Nair.


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