ICAN chipmaker Broadcom plans to buy NetLogic Microsystems for about $3.7bn (£2.3bn) to expand its lineup of chips used in wireless network equipment to take advantage of growing demand for mobile data services.
The $50-per-share deal, which represents a premium of 57 per cent over NetLogic’s Friday close on the Nasdaq, sent NetLogic’s shares soaring 50 per cent yesterday. But Broadcom shares were down 2.5 per cent as some investors questioned the steep premium.
Broadcom chief executive Scott McGregor defended the premium, noting that NetLogic would bring faster profit and revenue growth and that the addition of the products to Broadcom’s lineup would double the size of the network equipment market it can go after to about $12bn by 2015.
“Premier assets are going to cost more than a fixer-upper,” McGregor said. “They’re a decent growth company. They accelerate our revenue growth and increase our market opportunity.”
He said that Broadcom would continue to look for more acquisitions in the communications chip market.
In its latest quarterly report, NetLogic posted a 14.4 per cent revenue increase to $98.7m. Roughly 42 per cent of revenue depends on network equipment sales in China.