Chip Maker Broadcom Said To Be Close to Buying Cybersecurity Firm Symantec


Broadcom is reported to be in advanced talks Opens a new window to buy the cybersecurity firm Symantec for $15 billion as the Singaporean chip maker launches yet another takeover bid in the software market.

A deal could be finalized as soon as this week, although the announcement may be delayed, according to another report.

Broadcom is the world’s sixth biggest chip maker and has an aggressive acquisitions strategy under chief executive Hock C. Tan. The Malaysian-born businessman, who earned $103 million in 2017, has a reputation as a tough and unsentimental cost-cutter.

In 2015, when he led the chip maker Avago, Tan engineered a $37 billion hostile takeoverOpens a new window of Broadcom – a record price in the chip industry – and put himself in the driver’s seat of the combined company.

Another Hostile Takeover Blocked by US

But his plan to merge with rival Qualcomm last year to create a microchip powerhouse was blocked by President Trump on national security grounds.

Next, the company set its sights beyond the chip market and acquired CA Technologies for $18.9 billion. The purchase was a departure from Broadcom’s core market. CA Technologies makes infrastructure software such as test applications and cybersecurity software that run in mainframes, virtual machines and cloud computing.

Buying Symantec would be a further diversification for Broadcom.

Symantec claims to be the world’s biggest supplier of cybersecurity software, providing products and services to more than 350,000 organizations and 50 million people. But the company has been through tough times in recent years with slowing sales and claims of financial mismanagement by a whistle blower.

Symantec has been through a quick succession of chief executives. Chief executive Greg Clark stepped down in May after the company reported fourth quarter sales down 1.7% on revenues of $1.19 billion, slightly below analysts’ estimates.

Clark took the helm in 2016 when Symantec acquired Blue Coat, a security company he headed. He replaced Michael Brown, who also stepped down suddenly.

Symantec is led by interim CEO Richard Hill until its board finds a replacement. That may no longer be necessary if the Broadcom deal goes ahead.

Symantec’s Struggles

Last year, Symantec announced plans to cut about 8% of its global workforce amid slowing sales. The company is struggling in the enterprise security market and is considered by some to be a legacy business.

Symantec also faces intense competition with the rise of cloud security specialists and other new players in the cybersecurity market.

If the deal goes ahead, it suggests Tan sees a positive future for the company. At $15 billion, the acquisition would well below Symantec’s valuation of $19 billion just last year.

The push into software comes after Broadcom’s failure to merge with Qualcomm last year.

The Trump administration concluded that Broadcom posed a national security threat because one of its biggest clients is Huawei, the Chinese smartphone and gear manufacturer. The administration said it’s obliged to pass national security data to the Beijing government.

Merging with Qualcomm would have created a top-three chip manufacturer capable of challenging market leaders Intel and Samsung. But many believe consolidation in the chip market has run its course and more huge deals in the sector are unlikely.

Other Chip Makers in the Market, Too

Big chip makers are looking outside their core market for acquisitions. In 2011, Intel bought cybersecurity firm McAfee in a deal valuing the company at $8 billion and put it into a security division. But in 2016 it announced that it would convert its security division into a joint venture with TPG Capital, with Intel owning a 49% stake in a move that valued McAfee at the much lower sum of $4.2 billion.

Tan’s strategy is to buy market leaders in different areas of technology and operate them separately rather than integrating them into Broadcom. The aim is to deliver high cash returns.

Morgan Stanley analyst Craig Hettenbach wrote in a report quoted by BloombergOpens a new window : “In semi-conductors, the company was early and led the wave of consolidation across the industry. However, with many assets already off the board and remaining companies trading at high valuation multiples, the opportunity set in semis is much lower today.”

That said, Broadcom has a bright future with the growing demand for chips in a range of technologies such as 5G, autonomous vehicles and the Internet of Things. These developments are also increasing the attack surface for cyber threats so cybersecurity software is expected to grow substantially over the coming decade.

The combination of Broadcom’s chip business and Symantec’s security leadership has the potential to create a highly profitable combination. The big question is where Tan’s multi-billion-dollar acquisition trail is going to lead to next.