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Avago, Broadcom merger: Symptom of a larger trend

Posted: 02 Jun 2015 ?? ?Print Version ?Bookmark and Share


Earlier this year as well, Avago was out shoppingthis time agreeing to buy Emulex Corp. for $606 million. "Emulex is complementary to Avago's enterprise storage businesses," Avago CEO Hock Tan was quoted saying.

The Emulex acquisition followed Avago's selling of LSI's Accelerated Solutions Division (ASD) and Flash Components Division (FCD) to Seagate and the Axxia Networking product line of LSI to Intel, while retaining LSI's hard disc drive (HDD) controller products.

Slicing Broadcom?

Will Broadcom face a similar slicing? Probably not, as you might have gathered from the use of phrases like "little product overlap" and "synergy" in press announcements. According to Ford, LSI and Broadcom give the new company strength in the communications and storage categories, while there's hardly any impact on consumer electronics and industrial electronics and "almost no revenue from other data processing and automotive electronics."

Will Strauss, Principal Analyst at Forward Concepts, pointed out to EE Times Asia that Broadcom's founders, Henry Samueli and Henry Nicholas, have found a lot of mentions as having roles in the new company, but no mention of a role for McGregor. Strauss suspects that through stock options, McGregor will fade away and Hoc Tan will be in firm control of the new company, with the two founders as advisers and U.S. figure heads.

"Consequently, I believe that Hoc Tan will seek to spin out segments of the bigger company to continue financial growth," said Straus in an email. He did agree that there seems to be little overlap in products and that "judicious pairing could lead to new product offerings. For example, Avago's remote radio heads and fibre optics could (in theory) be paired with Broadcom's LTE base band expertise (left over from the earlier ill-fated Renesas Mobile acquisition)."

Dale Ford

Ford: Establishing yourself as a top/dominant player can help you competitively in growing market share.

Should Qualcomm worry?

"I do believe that Qualcomm needs to prepare to respond to the competitive challenge posed by this merger," said Ford. "The combined companies will be able to deliver many of the key pieces of the solution required for mobile/smartphones. This is especially true as the market shifts to LTE solutions where Avago has had strong RF solutions."

Ford also believes that although Broadcom shut down their base band business last year, the merger may lend sense to re-engaging in that business because that would give them a complete solution. "The ability of the combined company to provide a comprehensive set of solutions, including connectivity offerings, puts them in a strong position for the emerging IoT space. I think Avago/Broadcom will be one of Qualcomm's most significant competitors in the future," he added.

Strauss doesn't see Broadcom's #1 and Qualcomm Atheros' #2 ranking in WiFi chip business changing. However, "I don't think Broadcom will want to get back into the cell phone modem business, but it may want to get into the base station or even data centre businesses, both of which are on Qualcomm's radar.

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