Broadcom is in advanced talks to buy cybersecurity firm Symantec, according to people familiar with the matter, seeking a further expansion into the more profitable software business.
Broadcom could reach an agreement to buy the Mountain View, California-based company within weeks, said the people, who asked to not be identified because the matter isn’t public. No deal has been finalised and the talks could fall through, the people said.
A representative for Symantec declined to comment. A representative for Broadcom didn’t immediately respond to a request for comment.
Symantec’s shares rose 22% in extended trading on the news. They were little changed earlier on Tuesday, closing at $22.10, giving the company a market value of about US$13.7-billion. Broadcom slipped about 4% in late trading. They had fallen 1.7% in regular New York trading to close at $295.33, giving the semiconductor maker a market value of about $118-billion.
The deal would mark Broadcom’s second big bet in software, following its $18-billion takeover last year of CA Technologies. That transaction spurred some investors to express concern that Broadcom CEO Hock Tan’s acquisition strategy was being stretched too far after playing a key role in consolidating in the $470-billion chip industry.
That deal also came after San Jose, California-based Broadcom abandoned a hostile pursuit of rival chip maker Qualcomm, when US President Donald Trump blocked the transaction citing national security risks.
Cybersecurity software
Symantec is the world’s biggest maker of cybersecurity software, providing products and services to more than 350 000 organisations and 50 million people, according to its annual report.
The company has faced a list of challenges in the past year, grappling with heightened competition, the abrupt departure of its CEO, waning consumer interest in antivirus programs and a financial investigation that ended with restated earnings. The shares have gained about 17% this year, recovering from a 33% slump in 2018.
Activist investor Starboard Value won three board seats on the company in September.
Broadcom wouldn’t be the first chip maker to try a foray into security software. In 2011, Intel acquired McAfee for $7.7-billion. Intel’s plan was to hard-wire some of the software’s capabilities into its market-leading PC processors. The semiconductor maker was never able to pull that off, and ended up spinning off the unit in 2016 in a sale to TPG that valued the business at $4.2-billion.
Under Tan, Broadcom has pursued a different strategy for software. Tan said he acquires ‘‘franchises”, groups or businesses within companies that have sustainable market positions through technology leadership. He then invests in them to maintain that leadership, running them as distinct parts of Broadcom, rather than integrating the acquired products.
“Broadcom’s approach to M&A is to deliver high cash on cash returns, which it has been quite successful in achieving,” Morgan Stanley analyst Craig Hettenbach wrote in a report earlier this week. “In semiconductors, the company was early and led the wave of consolidation seen 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.” — Reported by Liana Baker, Ed Hammond, Kiel Porter and Ian King, with assistance from Dinesh Nair, (c) 2019 Bloomberg LP
