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Broadcom said to be in talks to buy Symantec
[NEW YORK] Broadcom has set its sights on acquiring a well-known name in cybersecurity software, in a further strategy shift after the Trump administration blocked it last year from purchasing another chip maker on national security grounds.
The semiconductor giant is in advanced discussions to buy Symantec, which makes anti-virus software and other products, two people briefed on the matter said Wednesday. Any deal would most likely value Symantec at more than US$15 billion, they said. A transaction could be announced in the coming days, though the people warned that negotiations were still taking place and could fall apart.
A Symantec spokeswoman declined to comment, while a Broadcom representative did not immediately return a request for comment. The talks were earlier reported by Bloomberg News.
If an agreement is reached, it will underline how much Broadcom has had to change its acquisition strategy after the humbling defeat of its US$117 billion bid last year to buy Qualcomm, the world's largest maker of wireless chips. The Trump administration said it was specifically concerned that a deal for Qualcomm, an American company, would cede the nation's primacy in the semiconductor and wireless industry and allow China to vault over the United States in next-generation wireless networks.
Since then, Broadcom has moved to buy software businesses. Last year, it agreed to buy CA Technologies, a maker of corporate software, for nearly US$19 billion. And Broadcom's chief financial officer, Tom Krause, recently told Morgan Stanley that the company would focus on buying so-called infrastructure software that powers back-end operations for businesses.
Broadcom, run by its highly acquisitive chief executive, Penang-born Tan Hock Eng, was incorporated in Singapore for most of its history before announcing that it would move its headquarters to San Jose, California, before its hostile takeover bid for Qualcomm.
Mr Tan has said he likes to buy mature companies with large, entrenched franchises that generate stable flows of cash. He then spins off what he considers less attractive or speculative businesses, doubling down on the larger profitable segments. That approach was crystallized in 2015 when Mr Tan's company — then called Avago — bought Broadcom for US$37 billion and assumed the Broadcom name. The combined company later sold several wireless chip units to Cypress Semiconductor.
The first sign that Mr Tan was open to buying non-semiconductor businesses came in 2016 when Broadcom made a US$5.5 billion deal to acquire Brocade, which makes computer networking hardware.
The software industry differs in some ways from semiconductor and other hardware businesses, starting with the lack of manufacturing and generally higher gross profit margins. But companies like CA and Symantec grew through their own acquisitions, accumulating assets that Mr Tan could consider restructuring or selling.
Symantec, founded in 1982 and based in Silicon Valley, has a wide range of products for safeguarding corporate computer networks. Its own recent acquisitions include a US$2.3 billion deal in 2016 to buy LifeLock, which specializes in protecting consumers from identity theft.
Symantec's most famous business over the years has been software for countering computer viruses that has been sold to consumers under the name of Peter Norton, a well-known programmer who sold his company to Symantec. The company branched into other segments of the enterprise software market, including the US$13.5 billion purchase of Veritas Software in 2005.
That deal was controversial on Wall Street, and Symantec wound up selling Veritas in 2016 to a group of investors led by the Carlyle Group for US$7.4 billion. That same year, Symantec agreed to a US$4.65 billion deal to buy Blue Coat, whose products included software that blocked a company's employees from reaching dangerous websites.
As part of that transaction, the investors Silver Lake and Bain Capital agreed to invest in Symantec. Blue Coat's chief executive, Greg Clark, took the chief executive post at Symantec.
But Mr Clark stepped down suddenly in May, triggering a sharp drop in Symantec's share price. Richard Hill, an industry veteran who was named interim president and chief executive, said in interviews that Clark's move had been partly related to disappointing financial results.
The company is also being investigated by the Securities Exchange Commission for its auditing practices. Symantec had initiated an internal audit after an employee raised concerns.
Symantec faces stiff competition, both from large players like Cisco and fast-growing startups such as Palo Alto Networks. In some cases, rivals now give away consumer products that Symantec originally sold.
Wall Street on Wednesday was tentatively positive about the possibility that Broadcom could increase profits by maximizing the strongest Symantec product lines and shedding others.
"Issues will likely be raised around Symantec's competitive position, as well as the consumer exposure," Stacy Rasgon of Sanford C Bernstein wrote in a research note. "But at the same time, there is undoubtedly good that better management can achieve here."