Image source: Broadcom.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of semiconductor designer Broadcom (UNKNOWN:BRCM.DL) soared as much as 23% higher Wednesday, following a Wall Street Journal story [subscription required] claiming that industry rival Avago Technologies (NASDAQ:AVGO) might acquire the company. Avago shares rose as much as 10% on the news.

So What: The Journal says that the two companies are in "advanced talks" regarding a merger, but couldn't clarify what the buyout terms might be. You almost have to assume that any merger agreement between these near-equals would rest more on stock-swapping than on cash payments: Each company is worth roughly $30 billion today, but their cash reserves are far thinner.

Now What: I wouldn't rule out Avago looking for another round of growth by acquisition, but Broadcom would be a surprising choice.

Avago has a proven thirst for large acquisitions, including the recently closed $609 million Emulex buyout and the $6.6 billion LSI Technologies pickup. The stock also jumped 4% two weeks ago, when Reuters spread the word that Avago was looking for another buyout. The proposed merger targets that time came with market caps as large as $12 billion. Even so, Broadcom would be a very ambitious partner. The two companies also serve very similar markets, raising the specter of regulatory hurdles.