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Broadcom's ambitious chief will shift target after Qualcomm halt: analysts


By and Sonam Rai

(Reuters) - Ltd, led by Hock Tan, is unlikely to put the brakes on an acquisition spree after its $117 billion bid for Inc was blocked by

Donald Trump on national security grounds.

That was the immediate reaction from Wall Street's tech sector analysts to Trump's surprise intervention on Monday afternoon to block what would have been the biggest ever tech merger.

Most assumed would walk away from the deal and some identified San Jose-based and Israel's Ltd as its likely next targets.

"We'll see if there is anything else can do to fight but given a likely long timeframe for a battle, and the fact that (panel) CFIUS seems so arrayed against them, we suspect they may be near the end of their rope," said.

could not be immediately reached for comment.

While a deal would have made the dominant supplier of used in and brought the company to the forefront of developing for the next generation of mobile network (5G), it can still make a string of smaller deals to build heft.

"We believe Broadcom's options start with a continuation of broadly-scoped communications-focused M&A," said. "covets high-margin, technology-rich moderate growth businesses with complimentary end market and customer exposure."

Xilinx and Mellanox would be a good fit for Broadcom, though not as a transformational level like Xilinx makes used for and Mellanox's products connect servers and storage systems, complementing Broadcom's broad portfolio.

Xilinx has a market capitalization of $20 billion and Mellanox just under $4 billion.

Neither company was immediately available for comment.

Tan is a serial acquirer who has turned Avago, the small chipmaker he was running with a market value of just $3.5 billion in 2009, into a giant with a market capitalization of over $100 billion in less than a decade.

Tan bought for $37 billion in a leveraged deal in 2015 and followed it up with a $5.5 billion deal to acquire two years later.

The in the (CFIUS), which raised concerns about the deal, listed the highly-leveraged nature of Broadcom's bid for its larger rival as a major concern and a risk to Qualcomm's leadership on mobile

For smaller deals, however, has a lot of firepower: about $11 billion in cash and the potential to generate nearly $9 billion per year in free cash flow, according to analysts' estimates.

shares were up 2 percent in trading before the bell on Tuesday.

(Reporting by and in Bengaluru; editing by Patrick Graham)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, March 13 2018. 18:44 IST