Insight Bite: Broadcom Eyes Another Enterprise Software Acquisition

The semiconductor industry hasn’t been kind to Broadcom of late, and the firm reported in June that US-China trade tensions and the ban on business with Huawei would knock $2 billion off sales this year.

But while profits from semiconductors are falling, Broadcom is pivoting further into enterprise software, and is now reported to be finalising the purchase of cyber security firm Symantec for a cool $22 billion.

The acquisition, which would come almost a year after it picked up enterprise software firm CA technologies, will cement Broadcom’s hold on a market which accounted for all of the chip company’s growth last year.

As a cybersecurity provider, Symantec derives most of its revenue from the enterprise sector, but sells a broad range of products that protect sensitive information in cloud and on-premise applications to corporate, government, and retail customers. 

Over the last year however, sales have dropped as other enterprise security providers have commanded a larger share of the market. This poor performance, which analysts attribute to issues with regulatory compliance and managerial uncertainty, could be leading Broadcom to consider Symantec as undervalued. 

By combining the cyber security firm with CA technologies in a private equity styled approach, Broadcom could potentially realise considerable cost savings, and continue enjoying the momentary boost in growth that the acquisition of CA provided.

Under pressure from the trade war and changes in the semiconductor industry, Broadcom is not the only chip company looking for other ways to generate revenue. 

Mergers and acquisitions are one way to find additional income streams, and while some semiconductor firms are riding out the storm by making deals with firms specialising in next generation technologies like IoT and Autonomous Vehicles, others like Broadcom are seeking to increase their software capabilities and capitalise on a market that typically offers higher margins than hardware.

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