Broadcom’s Nicholas: ‘We just got stronger’

29 May 2015 | Author: | No comments yet »

Avago buys Raspberry Pi chipmaker Broadcom in landmark $37bn deal.

Deals of the Day is your one-stop-shop for the morning’s biggest news from the finance beat, including M&A, IPOs, banks, hedge funds and private equity.Avago Technologies Ltd’s US$37bil (RM135.56bil) deal to buy chipmaker Broadcom Corp creates new competitive challenges for Qualcomm and may force the world’s largest mobile chip maker to radically rethink its own strategy.The purchase of Irvine’s Broadcom Corp. by Singapore-based Avago Technologies is the largest acquisition of a technology company on record and will create a sprawling global company with the most diversified platform in the semiconductor industry.

Nicholas III had at least two things to celebrate Thursday — the sale of his company for $37 billion to a rival chipmaker, and his son Matthew’s high school volleyball team playing in the CIF regional semifinals. “Today, I’m like giddy,” Nicholas, whose son plays for St. It’s a familiar playbook for the financial whiz behind Avago Technologies Ltd.’s record-breaking high-tech takeover of Broadcom Corp.: finance the deal with debt, get a bigger-name firm with a larger workforce then shed nonessential operations and staff to boost profit margins, the WSJ’s Don Clark reports. Qualcomm Inc, which has dominated the market for connectivity chips on smartphones, has been looking to extend its reach into data centres and network infrastructure, but may find its way blocked by an enlarged competitor combining Avago’s strength in storage and Broadcom’s power in networking. “Qualcomm has aspirations of moving into Intel’s data centre processor incumbency that the Avago storage and now enterprise networking (from Broadcom) capability directly overlays,” said Drexel Hamilton analyst Richard Whittington.

Although many details of the $37 billion deal have yet to be revealed, it likely means that Orange County will say goodbye to the headquarters of its largest public company. Broadcom is best known as the employer of Raspberry Pi founder Eben Upton and the manufacturer of the ARM-based chips that power the credit card-size PC. Wall Street analysts generally cheered the deal, despite some fretting about price, saying Broadcom’s strength in wireless networking, WiFi and Bluetooth chips is a good complement to Avago’s presence in industrial and wired devices.

Nicholas, who stepped down as chief executive of the Irvine chipmaker in 2003 but still owns 25% of the voting stock, hailed Broadcom’s purchase by Avago Technologies Inc. as “a logical progression” for the company he and Henry Samueli founded in 1991. “The question is not why now, but why not a couple of years ago,” he said. “Our objective has always been to be the the dominant player in the marketplace. The transaction is expected to close by the end of March 2016, and is subject to regulatory approval across various jurisdictions, as well as the approval of Avago’s and Broadcom’s shareholders. The transaction would meld two companies with complementary sales of communications chips, including processors that handle different chores in smartphones from Apple Inc. and Samsung Electronics Co. Now a Avago/Broadcom tie-up – which will take the name of Broadcom – potentially gives handset makers another viable supplier, giving them more leverage and putting even more pressure on Qualcomm, said IDC analyst Mario Morales. “The other material impact will come from the adjacencies that Qualcomm is trying to enter now, the data centre, infrastructure and the consumer area,” he added. “We see a lot of synergy in the technology they (Avago) are buying.” “I think there’s going to be a tremendous amount of growth in computing and resources dedicated to supporting the cloud,” Qualcomm chief executive Steve Mollenkopf said at last year’s Consumer Electronics Show. “We look at that as an opportunity for a company like ours.” NXP Semiconductors unveiled a deal in March to buy smaller peer Freescale Semiconductor Ltd. We are in striking distance of that now.” Nicholas started the company out of his Westside condo and later moved it to small offices in Westwood and then to it larger facilities in Irvine.

The partnership arrangement would give those shareholders—including Broadcom’s two co-founders, who collectively own about 8.6% of the company—flexibility in deciding when to take their tax hit. Amid much fanfare, the company had broken ground in March on a 73-acre campus near Irvine’s Great Park, intended to accommodate up to 8,000 workers. He said Avago’s announced acquisition reminded him of when Broadcom went public in 1998. “When we went public, it was like, ‘OK, we’ve got liquidity, but we’re still the same company,’ ” he said. “This time, we’ve still got the same company, but we just got stronger. …

A federal judge heard lively closing arguments Thursday in the government’s challenge to the planned merger of rival food distributors Sysco Corp. and US Foods Inc., pressing both sides on potential weaknesses in their positions. [WSJ] Equinix steps in. Henry Samueli, co-founder and chief technical officer at Broadcom, said: “When [CEO] Henry Nicholas and I founded Broadcom we had a vision of creating the world leader in communications semiconductors.

U.S. data center giant Equinix Inc. on Friday agreed to buy U.K.-based peer Telecity Group PLC in a cash and share offer worth $3.60 billion, squashing an earlier tie-up between Telecity and another European player. [WSJ] Record dealmaking pace. It’s really exciting.” Nicholas, whose sister Marsy was slain by her ex-boyfriend in 1983, has spent much of his time and effort in recent years on victims’ rights projects and legislation. Dealmaking in the United States has made its strongest start to a year since at least 1980, climbing 52% year on year to $746.9 billion in the Jan. 1 to May 28 period. [Reuters] Capmark gets Orchard Brands. Both parties in the merger of Time Warner Cable Inc. and Charter Communications Inc. are protecting themselves against a separation, CFO Journal’s Kimberly S.

He said he plans to continue to focus on that, but hinted that he also might find a role with the merged company. “I think Broadcom single-handedly took Orange County and made it the technology mecca it is today,” Nicholas said. “We were unique in that we were very much focused on recruiting. Defense company L-3 Communications on Thursday announced a $220 million cash acquisition of UK-based CTC Aviation Group, in a move to grow its commercial aviation training business. [WSJ]

Although the two companies make different products, such functions as sales, administration and engineering support could be targeted for cutbacks, Avago executives said in a call with financial analysts. Avago will pay $17 billion in cash and roughly $20 billion in stock to Broadcom shareholders, who will end up with 32 percent of the combined company. The indictments alleging corruption among FIFA officials leave corporate sponsors facing the dilemma of whether to back away from the powerful marketing outlet of the world’s most popular game.

The unraveling of an alleged sweeping conspiracy at the highest echelons of global soccer was aided in part by three men with ties to Jack Warner, the powerful, former international soccer broker indicted along with 13 others this week on wide-ranging corruption charges. They also point to the stunning success of companies such as Beijing Baofeng Technology Co., whose shares have skyrocketed more than 3,600% since listing in China in March.

The New York Stock Exchange is preparing a new plan to make it easier to buy or sell the shares of thousands of listed companies, an effort to counter the slow midday trading and uneven liquidity plaguing U.S. stock markets. At its annual developers’ conference, Google unveiled a mobile-payment system to tie people closer to its Android smartphones, previewed a new operating system for connected devices, launched a service to host photos and videos on Google’s computers and highlighted technology to worm itself deeper into mobile apps. Google product chief Sundar Pichai said Android now runs on more than 4,000 distinct devices, from tablet computers to watches, car dashboards and TVs.

Amazon’s planned expansion in the private-label business mirrors a more traditional retail model where name-brand products are sold beside store-owned goods. By rolling out a broad portfolio of private-label products, Amazon could yield higher profit margins, while also gaining leverage with its largest suppliers to pare prices.

Moody’s Investors Service said that it was upgrading the ratings of four of the largest U.S. banks – Morgan Stanley, Goldman Sachs Group Inc., Bank of America Corp. and Citigroup Inc. – after the company determined that some creditors would suffer fewer losses if those banks were to fail. Tesla Motors Inc. and other companies are jumping into the budding business of electricity-storage batteries, even though the current market is very small.

About 62 megawatts of storage systems were installed last year at 180 properties, with 99% of the power going to utilities, businesses or government buildings. A strong start to the year for many of Europe’s biggest bond funds was all but wiped out by an abrupt selloff in the region’s bond market, testing the mettle of investors who rely on the asset class for its steady returns. A former partner at Dewey & LeBoeuf testified the firm got caught in a never-ending debt cycle after the economic downturn, shedding light on how the once august legal outfit spiraled into bankruptcy. In an appearance marking his return to the public eye, Richard Fuld Jr. insisted he doesn’t want to play “woulda, coulda, shoulda” about the collapse of Lehman Brothers Holdings Inc.

But the former chief executive, speaking Thursday to a crowd of more than 1,500 people at the Grand Hyatt hotel in Midtown Manhattan, was unrepentant about his late firm’s culture and its role in the financial crisis, largely placing the blame instead on misguided government and central-bank policy and irresponsible borrowers. Teva Pharmaceutical Industries Ltd. will pay $1.2 billion to settle government allegations its Cephalon subsidiary paid generic-drug makers to delay competing versions of the sleep-disorder drug Provigil. Beijing is set to announce changes that will allow individuals and businesses to directly purchase stocks, bonds and real estate in foreign markets—part of a long-stated goal of making the yuan a global currency. Officials from the European Commission, the EU’s executive arm, are looking at legal justifications they could use to block the law because they view it as a bad precedent that could stifle innovation.

Hong Kong’s market regulator said it is investigating Chinese solar firm Hanergy Thin Film Power Group Ltd.—after the company’s chairman told Chinese media that a probe was “purely rumor.” The development adds still more uncertainty over the Chinese company that lost $18.6 billion in market value in moments last week. The Federal Reserve faulted Discover Financial Services for deficiencies in its anti-money-laundering program, issuing an enforcement action requiring the bank to step up compliance. Discover’s board last week approved a written agreement with the regulator promising the lender would improve its monitoring for suspicious transactions and increase the board’s oversight of the matter.

Tom Hayes, the former UBS AG trader accused of being the ringleader of a global interest-rate-rigging conspiracy, received a helping hand from his boss, Mike Pieri according to evidence presented at his London trial. A key measure of sales at Costco Wholesale Corp. fell for the first time in nearly six years, as the strong dollar and low gasoline prices ate away at the retailer’s revenue from international stores and gas pumps. Hit by stagnating growth and weakening investor confidence, Turkey’s ruling party is entering an election with a majority of voters saying the economy is poorly run.

Eros International PLC, an Indian-language films producer and distributor operating from Secaucus, N.J., named Prem Parameswaran group chief financial officer and president for North America “in the coming weeks following a brief transition period.” Mr. Every weekend we select a handful of in-depth articles we think are worth a bit of your valuable time, either because they peel back the layers on a compelling business story, or somehow make us look at business in a different light. Memorial Day weekend is an exceptionally busy one in the business of mattress sales, as life events ranging from kids going to college and young couples settling down after graduation point to a similar need: new beds. Monica Hesse, writing for the Washington Post, follows a particularly busy stretch of territory for the mattress businesses as the salesmen gear up for their annual ritual, and reports on the bits of humanity scattered throughout all of the bed-focused commerce. “To be a mattress salesman over Memorial Day was about being an educator and a therapist, Shaun believed.

Yew’s lead by creating a unified sense of purpose, developing a talent pipeline, executing on a simple—but differentiated strategy—and striking up the balance between “attention to detail” and “micromanagement.” Similarly, Michael Schrage writes in Harvard Business Review on how certain aspects of Navy SEAL training apply to the C-Suite. Wired’s oral history of Industrial Light and Magic, the special effects lab built exclusively to create from nothing the 800 shots that defined 1977’s Star Wars, has plenty of startup touchstones. But unlike most startups, ILM has endured, its talent pool of tinkerers leading the transformation of its industry, most recently in the field of computer generated effects. There’s a lesson there in how they stay agile. “For every show I’ve done, I have convinced myself the work was obsolete,” says creative director Dennis Muren. “If there’s another film out next summer, I don’t want to be reminded of the last one, even if the theme’s the same.

It’s up to me to find some way to make that different.” The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning.

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