Broadcom Inc., a chip making company is taking over U.S. business software company CA Technologies in a $18.9 billion deal.
Broadcom Inc. (formerly Avago Technologies) is a designer, developer, global supplier of analog and digital semiconductor of products. On the other hand, CA Technologies is an American multinational company which creates system softwares. Broadcom’s chips support smartphones, computers and networking equipment. With this deal, Broadcom will seek to expand its business in software market.
CA Technologies published $4.4 billion in revenue for a fiscal year of 2014 and has offices in more than 40 countries. The company employs more than 12,000 people worldwide. holding more than 950 patents worldwide.
Rapid expansion since 2013
From 2013, Broadcom Inc. rapidly expanded its business using their deal making capabilities as they grew from 4 per cent share of the chip market to a 30 per cent share this year.
Broadcom is using the opportunity to potentially buy out its competitor to expand its market share of the wireless chip business. Broadcom acquired networking gear company, Brocade Communications Systems for $5.5 billion last year. Earlier, they offered an unsolicited bid of $130 billion to their biggest rival, Qualcomm which is the 3rd largest semiconductor vendor.
Broadcom Chief Financial Officer Tom Krause said, “What we do is buy mission-critical technology businesses.” Further he added, “CA is a mission-critical technology. We’ve been pretty impressed not only with (CA’s) management, but also the team that CA has built around these core franchises that we value.”
Major CA Technology’s shareholders, Careal Property Group AG and affiliates having 25 per cent of CA’s shares are agreed to vote for an agreement after this announcement.
The key customers of Broadcom namely Apple Inc. and Samsung Electronics Co Ltd are consolidating supplier relationships with Broadcom which is helping its main semiconductor business to become more competitive in the market.