Avago Technologies (AVGO) is in advanced talks to acquire wireless chipmaker Broadcom, according to The Wall Street Journal. Broadcom, which produces a variety of radios for cellphones and other consumer devices, had a market cap of $28 billion before the takeover report surfaced. Broadcom also makes chips used in networking gear for the data center, and both business lines could compliment Avago’s more industrial and component-level focus.
Avago was created when private equity firms Silver Lake and Kohlberg Kravis Roberts & Co. (KKR) purchased the Agilent chip assets in 2005 to create a new rollup in the semiconductor market. It has since acquired other companies like LSI, and was reportedly looking to spend about $10 billion buying another chipmaker like Xilinx (XLNX), Renesas Electronics or Maxim Integrated Products (MXIM). Avago makes a variety of analog and mixed-signal chips used in automotive, industrial and communications applications. It also makes custom-designed chips known as ASICS that are used in networking.
Broadcom would be a large company to swallow, but the industry is consolidating. As I wrote two weeks ago:
If Avago does snap up Broadcom, then the next obvious question for the silicon industry will be what happens to Marvell (MRVL). It too offers Wi-Fi radio, storage, and communications chips, and is much smaller in terms of sales. In this era of consolidation, will it remain independent much longer?