Leading chipmaker Broadcom Corporation (BRCM) recently announced that it will acquire NetLogic Microsystems or $3.7 billion or $50 per share.
Headquartered in Santa Clara, California, NetLogic develops high-performance intelligent semiconductor solutions that power next-generation Internet networks.
The transaction is expected to close in the first half of 2012. Broadcom expects the acquisition to be accretive to its bottom-line by approximately $0.10 (excluding onetime items) in 2012.
Management expects the acquisition to broaden Broadcom’s infrastructure portfolio with a number of critical new product lines and technologies, including knowledge-based processors, multi-core embedded processors, and digital front-end processors. Broadcom has stated that through this acquisition, it will be acquiring a leading multi-core embedded processor solution, market leading knowledge-based processors, and unique digital front-end technology for wireless base stations that are key enablers for the next generation infrastructure build-out.
Broadcom also reiterated its business outlook for the third quarter of 2011. Broadcom projects revenues between $1.9 billion and $2.0 billion in the third quarter. Product gross margin is expected to be flat or up slightly. Broadcom forecasts research & development and selling, general and administrative expenses to be flat to down $10 million in the third quarter of 2011.
The company expects to end the third quarter with approximately $4.2 billion in cash and cash equivalents on hand, up from approximately $3.8 billion at the end of the second quarter.
Earlier, Broadcom Corporation generated revenues of $1.796 billion in the second quarter of 2011, up 12% year over year but down 1% sequentially and slightly missed the Zacks Consensus Estimate of $1.806 billion.
Broadcom’s net income came in at $175 million or $0.31 per share compared to a net income of $278 million or $0.52 per share in the year-ago quarter and a net income of $228 million or $0.40 per share in the previous quarter. Excluding one-time items, net income per share came in at $0.48, easily beating the Zacks Consensus Estimate of $0.40.
We continue to maintain a Neutral recommendation on Broadcom. Our Neutral recommendation is supported by a Zacks#3 Rank, which translates into a short-term rating of Hold.
