Talk of Broadcom Buyout of Symantec Puts Broader IT Focus Into View

Broadcom is once, twice, three times a multi-billion-dollar dealmaker (well, basically) in the past year if it follows through on its reported talks to acquire Mountain View, CA-based cybersecurity giant Symantec.

The potential acquisition, which was first reported Tuesday by Bloomberg citing anonymous sources, represents Broadcom’s continued (NASDAQ: AVGO) interest in broadening its business beyond semiconductors. Acquiring Symantec (NASDAQ: SYMC), which provides services to 350,000 businesses globally, would further its broadening into software services. (The deal hasn’t been finalized and could still fall through, according to Bloomberg.) Though it is one of the largest cybersecurity software providers, Symantec is a company in transition after its CEO Greg Clark stepped down in May, rising competition, and other troubles, as Bloomberg noted.

Founded in Los Angeles, in 1991, the chipmaker—which a few years later moved to Irvine, CA—was acquired by Singapore’s Avago in 2016 in a $37 billion merger that shifted the combined company’s headquarters to the Southeast Asian island nation. Last year the company, which retained the Broadcom name, relocated its head office back to the US, to San Jose, CA: Its overseas status played a significant role in stymying its attempted hostile takeover of San Diego’s Qualcomm (NASDAQ: QCOM), a proposal President Trump unilaterally prohibited in March 2018.

The failure of that high-profile tie-up bid, however, didn’t sour Broadcom CEO Hock Tan on massive M&A: In November, the company acquired CA Technologies (NASDAQ: CA) for $18.8 billion. CA sells software for enterprise businesses to manage their computing systems, whether that’s on a traditional mainframe, in the cloud, or a hybrid of the two. Broadcom made the acquisition as part of a strategy to become a broad-based IT provider, not one merely focused on semiconductors, according to its annual report.

Symantec stock traded at $25.10 per share when the market closed Wednesday, 13.6 percent above its close the previous day. Broadcom shares dropped by 3.5 percent to $284.89 each as of Wednesday’s close.

Broadcom apparently isn’t interested in all the software businesses it can get its hands on, though. In connection with its November acquisition of CA, Broadcom sold Burlington, MA-based Veracode to private equity firm Thoma Bravo for $950 million (so, almost $1 billion.) CA Technologies had acquired Veracode for $617 million in 2017, according to Broadcom’s latest annual report. Broadcom didn’t specify in regulatory filings any other reasons it was spinning out Veracode, which focuses on cybersecurity for application development.

In an interview with Xconomy in June, Veracode CEO Sam King said that during a meeting with Broadcom executives she learned Veracode’s application-focused area of cybersecurity wasn’t a focus area for Broadcom.

“It was clear to them and us that we are a growth business and that the area we are in cybersecurity wasn’t the driving force behind Broadcom’s acquisition of CA Technologies,” King told Xconomy. “It makes sense for us to be spun out as an independent business.”

Broadcom invests heavily in research and development, too, which is tied to its acquisitions. The company recorded about $3.77 billion in R&D expenses in the 2018 fiscal year, which ended Nov. 4. That was a 14 percent increase from the year before, though the increase was primarily due to its $5.5 billion acquisition of San Jose-based Brocade Communications Systems at the end of 2017, according to its annual report. The company expects R&D spending to be up in 2019 due to the CA Technologies deal, the report says.

Comparatively, Qualcomm spent about $5.63 billion on R&D during its 2018 fiscal year, a 2.6 percent increase over the year before.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at [email protected] Follow @xconholley

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