Broadcom Earnings In Focus After Qualcomm Bid Withdrawal

Release time：2018-03-15
author：Ameya360
source：IBD
reading：3586

　　Chipmaker Broadcom (AVGO) on Wednesday officially withdrew its offer to acquireQualcomm (QCOM) following President Trump's executive order blocking the deal on national security grounds.

　　"Although we are disappointed with this outcome, Broadcom will comply with the order," Broadcom said in a statement. The Singapore-based company said it plans to continue the process of moving its global headquarters to the U.S. Broadcom, which has its U.S. headquarters in San Jose, Calif., expects to complete the move by April 3.

　　"From a stock perspective, we view the executive order as a slight positive as it removes a near-term distraction and overhang on the stock," KeyBanc Capital Markets analyst John Vinh said in a report. "As a stand-alone entity moving forward, we still view Broadcom as one of the best-run companies in the semiconductor industry with secular growth drivers in RF (radio frequency), data center and networking (chips)."

　　Investor attention now shifts to Broadcom's fiscal first-quarter results, scheduled for release after the market close on Thursday.

　　Wall Street expects Broadcom to earn $5.04 a share, up 39% year over year, on sales of $5.32 billion, up 28%, in the January quarter.

　　For the April quarter, analysts are modeling Broadcom to earn $4.63 a share, up 25%, on sales of $5 billion, up 19%.

　　Broadcom shares dipped 0.2% to close at 260.59 on the stock market today. Qualcomm, meanwhile was up 0.7% to 60.12.

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Broadcom to acquire CA Technologies for $18.9B in cash
Trade news

Broadcom to acquire CA Technologies for $18.9B in cash

Broadcom Inc. (NASDAQ: AVGO), a semiconductor device supplier to the wired, wireless, enterprise storage, and industrial end markets, and CA Technologies (NASDAQ: CA), one of the world’s leading providers of information technology (IT) management software and solutions, today announced that the companies have entered into a definitive agreement under which Broadcom has agreed to acquire CA to build one of the world’s leading infrastructure technology companies.Under the terms of the agreement, which has been approved by the boards of directors of both companies, CA’s shareholders will receive $44.50 per share in cash. This represents a premium of approximately 20% to the closing price of CA common stock on July 11, 2018, the last trading day prior to the transaction announcement, and a premium of approximately 23% to CA’s volume-weighted average price (“VWAP”) for the last 30 trading days. The all-cash transaction represents an equity value of approximately $18.9 billion, and an enterprise value of approximately $18.4 billion.Hock Tan, President and Chief Executive Officer of Broadcom, said, “This transaction represents an important building block as we create one of the world’s leading infrastructure technology companies. With its sizeable installed base of customers, CA is uniquely positioned across the growing and fragmented infrastructure software market, and its mainframe and enterprise software franchises will add to our portfolio of mission critical technology businesses. We intend to continue to strengthen these franchises to meet the growing demand for infrastructure software solutions.”“We are excited to have reached this definitive agreement with Broadcom,” said Mike Gregoire, CA Technologies Chief Executive Officer. “This combination aligns our expertise in software with Broadcom’s leadership in the semiconductor industry. The benefits of this agreement extend to our shareholders who will receive a significant and immediate premium for their shares, as well as our employees who will join an organization that shares our values of innovation, collaboration and engineering excellence. We look forward to completing the transaction and ensuring a smooth transition.”The transaction is expected to drive Broadcom’s long-term Adjusted EBITDA margins above 55% and be immediately accretive to Broadcom’s non-GAAP EPS. On a combined basis, Broadcom expects to have last twelve months non-GAAP revenues of approximately $23.9 billion and last twelve months non-GAAP Adjusted EBITDA of approximately $11.6 billion.As a global leader in mainframe and enterprise software, CA’s solutions help organizations of all sizes develop, manage, and secure complex IT environments that increase productivity and enhance competitiveness. CA leverages its learnings and development expertise across its Mainframe and Enterprise Solutions businesses, resulting in cross enterprise, multi-platform support for customers. The majority of CA’s largest customers transact with CA across both its Mainframe and Enterprise Solutions portfolios. CA benefits from predictable and recurring revenues with the average duration of bookings exceeding three years. CA operates across 40 countries and currently holds more than 1,500 patents worldwide, with more than 950 patents pending.
2018-07-16 00:00 reading：3546
Wall Street Unimpressed by Broadcom's Latest M&A Deal
Trade news

Wall Street Unimpressed by Broadcom's Latest M&A Deal

Broadcom's stock price tumbled Thursday after the chipmaker announced its latest acquisition bid, an $18.9 billion offer to buy an established vendor in the seemingly unrelated field of IT management software.Broadcom (San Jose, Calif.) said it signed a definitive agreement to acquire CA Technologies in a cash deal that gives CA Technologies a 20% premium over its closing stock price Wednesday. The deal is expected to close in the fourth quarter, Broadcom said.Broadcom has grown substantially in recent years, largely through acquisition of other chip companies, including the $37 billion merger of Avago and Broadcom in 2015. A $105 billion hostile bid to acquire Qualcomm was blocked earlier this year by U.S. President Donald Trump on national security grounds.But analysts have expressed concern that the acquisition of CA Technologies offers no synergies with Broadcom's existing chip businesses and doesn't align with the company's core strategy. Broadcom's stock price declined by 15% Thursday morning in the wake of the announcement.Tan said Broadcom would continue to strengthen CA Technologies businesses to meet the growing demand for infrastructure software solutions.
2018-07-13 00:00 reading：3472
Broadcom Eyes New Acquisition Targets
Trade news

Broadcom Eyes New Acquisition Targets

　　Broadcom executives said the company is eyeing fresh potential targets for acquisition, just days after U.S. President Donald Trump quashed the company's proposed $117 billion hostile takeover attempt of rival Qualcomm.　　"We do see potential [acquisition] targets that are consistent with our proven business model and that also can drive returns well in excess of what we would otherwise achieve buying our own stock and/or paying down debt," said Tom Krause, Broadcom's chief financial officer, in a conference call with analysts to discuss the company's fiscal first quarter financial results.　　But Krause added that future acquisition targets would be much smaller than the deal for Qualcomm, which would have been the largest high-tech acquisition in history and been financed largely through bank loans.　　"Our future acquisitions are much more likely to be funded with cash available on our balance sheet and without the need to flex the balance sheet much beyond our current financial policy of two times net leverage," Krause said. He added that Broadcom executives would not take comments on the Qualcomm deal or Trump's order in the Q&A portion of the analyst call.　　Trump, in an order issued Monday (March 12), took the unprecedented step of prohibiting an acquisition on national security grounds prior to a deal being finalized. In fact, after Qualcomm's board unanimously rejected Broadcom offers multiple times, the fate of the acquisition bid was to be decided by the election of Qualcomm board members at Qualcomm's annual shareholder meeting.　　The Qualcomm stockholder vote had been pushed back after the Committee on Foreign Investment in the United States (CFIUS) raised concerns that the acquisition of Qualcomm by Broadcom would hurt U.S. standing in 5G and pave the way for Qualcomm rivals based in China to take the lead in the space.　　Analysts widely expect Broadcom to continue its acquisition spree following the Qualcomm ruling. Under CEO Hock Tan, Broadcom has grown aggressively through acquisition, including recent buys of LSI and Brocade. Broadcom as it exists today was formed through acquisition when Avago Technologies bought Broadcom Corp. in 2015 and took the name.　　Also Thursday, Broadcom reported fiscal first quarter earnings and sales slightly better than most analysts expected. The company posted sales of $5.33 billion, up 10 percent from the previous quarter and up 29 percent from the first quarter of fiscal 2017.　　Broadcom reported a net income of more than $6.57 billion for the first quarter, thanks largely to the significant impact of provisional income tax benefits provided by the U.S. government's recent tax code overhaul. The net income was more than 10 times the net income the company reported in the previous or year-ago quarters.　　For the current quarter, Broadcom said it expects sales to decline to about $5 billion.
2018-03-19 00:00 reading：3438
Broadcom Bid Gets U.S. Scrutiny
Trade news

Broadcom Bid Gets U.S. Scrutiny

　　A letter from a U.S. government agency casts a shadow over Broadcom’s hostile takeover bid for Qualcomm, saying that it “could pose a risk to the national security of the United States.”　　The letter from the Committee on Foreign Investment in the U.S. (CFIUS) lays out a case why the acquisition could threaten the U.S. position in wireless communications standards, patents, and products — potentially to the benefit of China. It was dated March 5 and addressed to attorneys from both companies.　　The letter came along with an order from CFIUS. It requires Qualcomm to delay by 30 days a shareholder meeting on a proxy vote on rival board candidates. In addition, it prevents either company from “taking any action” toward the merger while an investigation is in progress.　　The order also requires Broadcom to give CFIUS five days of written notice before taking any action on the move of its headquarters to the U.S. In addition, it orders both companies to provide weekly updates of their actions to comply with the order.　　In early November, Broadcom CEO Hock Tan met with President Trump to announce that the company’s headquarters will move from Singapore to the U.S., a process that Broadcom later said could be complete by May 6. However, Qualcomm submitted a request for review of the acquisition to CFIUS on Jan. 29.　　That letter triggered “multiple phone calls, emails, and meetings” with CFIUS and representatives of the two companies. Indeed, while the two companies were undergoing a heated public battle for the hearts and minds of investors, they also were engaged in an equally intense battle to make their case with the inter-agency group of regulators.　　“As a result of these communications … CFIUS has come to believe that Broadcom’s successful takeover attempt of Qualcomm … could pose a risk to the national security of the United States,” said Aimen N. Mir, a deputy assistant secretary with the Department of Treasury who signed the letter.　　The letter lays out a case that, in part, points to concerns about China as well as risks associated with “Broadcom’s relationships with [unnamed] third-party foreign entities.”　　CFIUS will conduct an investigation, at least part of which will remain classified. The unclassified aspects that the letter detailed included concerns that the U.S. could lose standing in 5G cellular technology and standards and a supply of trusted semiconductors to classified Department of Defense programs.　　“A weakening of Qualcomm’s position would leave an opening for China to expand its influence in the 5G standards-setting process … For example, Huawei has increased its R&D expenditures and owns about 10% of essential 5G patents,” although the U.S. still dominates in 5G patents, it said.　　The letter cited long-standing concerns about the security of Huawei and ZTE as telecom equipment providers. It also noted Broadcom’s practice of spending more on acquiring companies than on internal R&D.　　Broadcom has lined up $106 billion in debt financing to cover the acquisition, “the largest corporate acquisition loan on record,” it said, adding that this would put intense pressure on Broadcom to trim R&D expenses.　　The letter also cited Broadcom’s unspecified plans for changing Qualcomm’s licensing practices that have come under fire from regulators around the world as well as Apple, one of Qualcomm’s largest customers.　　In terms of products, “Qualcomm currently holds active sole source classified prime contracts” with the Department of Defense, it said.　　The CFIUS investigation aims to explore all of these issues. Just what conclusion it will reach and whether President Trump will weigh in remains to be seen.　　Broadcom pledged to keep the U.S. a leader in 5G cellular in a response it released Wednesday to the CFIUS letter. The company noted its longstanding investments in core communications technologies such as its leading Ethernet switches.　　To reassure U.S. government concerns about losing dominance in wireless technology to China, Broadcom also pledged to create a new $1.5 billion fund to train and educate engineers in the U.S. In addition, Broadcom said it “is in every important respect an American company,” and called Qualcomm’s patent licensing practices “predatory and anticompetitive.”　　Some Wall Street stock analysts characterized Qualcomm’s effort to spark a CFIUS investigation as a delay tactic, giving it time to win China’s approval of its bid for NXP and stave off a Broadcom acquisition. But Broadcom is not likely to give up its bid and shareholders are likely to approve it, said three analysts in research notes provided to EE Times by Broadcom.　　The dispute comes at a time when Trump has already launched a volley in what some say could be a trade war against rivals such as China over aluminum and steel. Meanwhile, China’s government is raising tens of billions to expand its semiconductor industry, and it is poised to waive term limits for its president, Xi Jinping.　　For now, the biggest proposed acquisition in semiconductor history has more than investors to win over.
2018-03-08 00:00 reading：1315
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