The company has agreed to acquire smaller NetLogic Microsystems
Broadcom, an Apple
NetLogic, which derives a substantial chunk of its revenue from bellwether Cisco Systems
Combining the businesses makes sense. The only part of the deal that I can't say I'm thrilled about is the massive premium. Broadcom recently delivered a strong quarter, with $1.8 billion in revenue compared with NetLogic's recent quarter's revenue of $103.7 million. Before today, Broadcom's market cap stood at $17.7 billion and NetLogic's rested at $2.2 billion. This $3.7 billion acquisition seems a little too expensive for my liking.
The market is expressing its skepticism as investors drove shares down almost 5% throughout the day. Elsewhere in the sector, the acquisition has spurred speculation that rivals such as Marvell Technology
What do you think? Is Broadcom getting good bang for its 3.7 billion bucks? Share your thoughts in the comments box below.
Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Marvell Technology Group and Cisco and has created a bull call spread position on Cisco. Motley Fool newsletter services have recommended buying shares of Cisco. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.