With analysts and investors struggling to understand Broadcom’s $19 billion CA purchase, it’s worth taking a look at how the company has evolved over the years.
The bottom line: Broadcom has changed a great deal since its origins as a communications chip startup. But many believe its plan to buy a software company is a bridge too far.
Shares of the company fell 14% on Thursday as the markets digested the deal, which was announced Wednesday. As Axios’ Dan Primack notes, Broadcom lost almost the exact same value in market cap as it’s paying for CA.
Our thought bubble: We didn’t get it either. Our best guess was that perhaps there was another shoe to drop, perhaps another deal that would help bridge the wide gulf between what Broadcom and CA do.
It sounds like that may indeed be what’s up, with CNBC reporting that Broadcom has its eye on rolling together multiple business software companies together in the same vein it did with chips.
Meanwhile: Ken Hao, a partner with Silver Lake and longtime adviser to Broadcom CEO Hock Tan, stepped down from Broadcom’s board in connection with the deal. The basic idea is that Silver Lake could be on the board of a chipmaker, because it didn’t really otherwise invest in chipmakers. But if Broadcom is going to begin gobbling up enterprise software makers, then Silver Lake could have all sorts of conflicts.
History lesson: The company today called Broadcom is in significant part the heritage of Avago, which bought Broadcom in 2015 and took its name.
Avago’s roots trace back to the early 1960s when it began life as the chip business of Hewlett-Packard, later spun out as part of Agilent Technologies. Avago then proceeded to gobble up rivals big and small, notably LSI and then Broadcom.
As for Broadcom, it was a pioneering communications chipmaker that dominated the early market for cable modems and networking chips, using dozens of acquisitions to expand into Wi-Fi, cellular and other areas.
What’s next: Broadcom will be under pressure to better explain itself. The deal’s backers have already brought in investor communications firm Joele Frank, known as one of the top go-to firms when transactions get thorny.