Broadcom casually drops $61bn on VMwareWhat’s that you say? Broadcom is set to buy cloud software company VMware for $61bn, in one of the biggest tech acquisitions ever? Looming recession? Broadcom don’t give a monkeys.
- US chipmaker Broadcom will be transformed into a multi-tech business with the acquisition, costing a whopping $69bn (including debt). Former Dell firm VMware is known as one of the industry’s most profitable companies and is used by many big corporations to manage their data centers and cloud networks, so Broadcom wan it.
- The steal was led by Broadcom CEO Hock Tan, who has been desperate for a software acquisition for some time after failing to buy Qualcomm in 2018 when Prez Trump blocked the shot. Tan’s been eyeing up M&A deals left, right and center as he aims to diversify Broadcom and “reimagine what we can deliver to customers”.
- Broadcom’s offer marks a 33% premium on the value of the firm since talks of a deal emerged last week. VMware shareholders have been offered either $142.50 in cash or 0.2520 shares of Broadcom stock for each share. But will this one go through?
Laura Ockel / Unsplash
Subscribe to Snaps
See the market snapshots that matter and nothing else – sent to your inbox daily. Designed to be read in 20 seconds or less.
Broadcom brings in the gainsSoftware company Broadcom is fully dialed in to investors’ needs, but its CEO has a warning for the bulls.
- The stock was up 3% in extended trading on Wednesday after Broadcom beat estimates on both the top and bottom lines with EPS of $8.39 on revenues that were up 16% y-o-y to hit $7.71bn.
- CEO Hock Tan says demand from corporate customers is “on fire”. Telecoms providers and data-center owners are splashing the cash on new tech, contributing to guidance that also topped estimates – the chip maker expects revenue growth of 20% this quarter to bring in $7.9bn.
- But Tan doesn’t think the growth is sustainable, not just for Broadcom but for the industry as a whole. He thinks anyone who sees the chip market continuing at this pace is “dreaming”, and sees the $550bn industry decelerating to historical growth rates of about 5%.
Laura Ockel/ Unsplash
Buyback brillianceChip and software company Broadcom posts a healthy earnings beat with a buyback program that sends the stock rallying.
- Prices lifted 8.27% on Friday to a new all time high, and the chip and software company is now up 14% for December so far.
- It reported EPS of $7.81 on revenue of $7.41bn, topping estimates of EPS of $7.74 on revenues of $7.36bn.
- Its semiconductor segment is strong thanks to demand for its data center chips, seeing revenue growth of 17% to $5.6bn.
- Guidance got people excited. It expects fiscal first quarter revenue to lift 14% to $7.6bn, soundly beating analysts forecast of $7.3bn.
- It unveiled a massive $10bn buyback plan that it’ll complete before the end of 2022, and hiked its quarterly dividend by 14% to $4.10 a share, signalling confidence in its forecasts and cash flow.
- “What’s not to like here?”, as Bernstein analyst Stacy Rasgon puts it. Of the 32 analysts that cover Broadcom, 18 hiked their price target on the stock on the back of the earnings.
Illustration by TradingView