Broadcom Snaps Up NetLogic For £2.4bn

Broadcom, a specialist provider of Bluetooth and Wi-Fi chips for iPhones and Samsung Galaxy Tabs, broadened its offerings into the embedded systems market by acquiring NetLogic Microsysems for $3.7 billion (£2.4bn) in cash.

Broadcom said the transaction is expected to close in the first half of 2012. Terms of the deal netted $50 (£31.62) per share for NetLogic stockholders.

Santa Clara, California-based NetLogic makes low-power-usage multicore embedded processors, mostly for content processing workloads. The company also has developed a line that features built-in network intelligence.

Portfolio Expansion

NetLogic also will augment Broadcom’s catalogue with some new product lines, including digital front-end processors for wireless base stations.

With the acquisition, Broadcom is now better positioned to meet growing demand for integrated, end-to-end communications and processing platforms for network infrastructure, said Broadcom’s CEO Scott McGregor.

Jefferies & Co. analysts Mark Lipacis, Sundeep Bajikar and Rafi Hassan wrote in an advisory that “we believe that NetLogic is one of the fastest-growing semiconductor stocks in our coverage universe, and estimate sales at $514 million (£325m) in 2012, which will significantly add to Broadcom’s product portfolio.

Positive Move

“We view the acquisition as a positive, as we estimate it will add critical growth drivers and is accretive to both gross margins. NetLogic commands about 70 percent market share in knowledge-based processors and a small but growing share of multicore processors.”

On a conference call to analysts, journalists and stockholders, Broadcom reiterated its business outlook for the third quarter of 2011, saying that it expects revenue of between $1.9 billion (£1.2bn) and $2 billion (£1.3bn).