The deal is the latest and among the largest in a string of mergers rocking the chip industry. Fred Katayama reports.
Avago's hunt for a big chipmaker is over. The HP spinoff is shelling out $37 billion in cash and stock to buy rival Broadcom. The deal will create a communications semiconductor giant with roughly $15 billion in annual revenue. Avago will get Broadcom's chips that are used in cable modems and Apple's and Samsung's smartphones. It had earlier held talks with the likes of Xilinx, Maxim Integrated Products, and Renesas Electronics in its bid to diversify its wireless and industrial chip lineup. The combined company will be renamed Broadcom Limited, and Avago CEO Hock Tan will run it. The holding company will be based in Singapore, where corporate taxes are low. Mizuho Securities analyst Vijay Rakesh noted the double-digit operating margins at both companies, saying "There is definitely room for accretion." The deal is the latest and among the largest in a string of mergers rocking the chip industry. Slowing growth has pushed companies to seek merger partners. Avago bought Emulex in February. And the next month, NXP acquired Freescale. Intel is reportedly in talks once again to buy Altera. Avago shares added on to their nearly 8 percent gain Wednesday when news of the talks came out. Broadcom shares gave back some of Wednesday's 21 percent gain at the open.. Separately, Avago reported that profit fell in the latest quarter. Revenue more than doubled but missed Wall Street's expectations.