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Broadcom-Avago One Year Later

February 28, 2017

Author: Bob Wheeler

Despite fears that fiscal priorities would decimate engineering teams, things haven’t changed dramatically for much of “classic Broadcom” since its acquisition by Avago, which closed last February. Although a new focus on the bottom line permeates the merged entity, Avago’s management has made largely predictable adjustments while leaving most Broadcom business units whole. The company has carried out several divestitures, but only one with major implications for future growth.

The biggest change for the classic-Broadcom businesses came when the company sold what it called the wireless-IoT business to Cypress last April. That deal enabled Broadcom to shed 430 employees, and the business primarily served consumer electronics, which are not a company focus. Broadcom’s wireless segment has since increasingly focused on two customers—Apple and Samsung. It also continues to serve access-point and router designs for Wi-Fi infrastructure.

In its quarter ended October 30, 2016, Broadcom generated 50% of its revenue from wired infrastructure, which includes set-top-box, broadband-access, and Ethernet chips from classic Broadcom as well as the former Avago ASIC and fiber-optic businesses. The classic-Broadcom product divisions in this segment remain, except the processor-products division, which merged into the division that develops the StrataGX SoCs.

With the “Brovago” integration largely complete, Broadcom in November announced it would acquire Brocade Communications Systems for about $5.9 billion. It plans to keep Brocade’s Fibre Channel storage business while divesting the Internet Protocol (IP) networking business. As a move to vertically integrate Broadcom’s Fibre Channel business, the Brocade acquisition will have little impact on Broadcom’s core chip business.

Avago’s management has largely delivered on its promises of a leaner and more profitable company while continuing to invest in “sustainable franchise” product lines that dominate their respective markets. Customers may grumble about tougher price negotiations, but few have felt an impact from major product-roadmap adjustments. Broadcom’s competitors were hoping for more-draconian changes—ones that would have left bigger openings in the market.

Subscribers can view the full article in the Microprocessor Report.

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