Broadcom Makes $10.7 Billion Deal to Buy Symantec Unit -- Update
By Asa Fitch
Broadcom Inc. struck a $10.7 billion deal to buy Symantec
Corp.'s enterprise security business, as it steps up efforts to
expand beyond chip making.
Semiconductor maker Broadcom, which has a history of
acquisitions, Thursday said the cash acquisition was the next
logical step in building a business around software for
The Wall Street Journal on Wednesday reported the two companies
were close to a deal after talks for Broadcom to buy all of
Symantec collapsed last month.
The part of Symantec, best known for its antivirus software,
that Broadcom is buying focuses on sales to companies. That part
contributes roughly half of Symantec's $5 billion in annual
revenue. The consumer segment accounts for the rest of the 37-year
old company's revenue.
Broadcom Chief Executive Hock Tan has been focused on
diversifying beyond the company's core chip business and pushing
into the lucrative software arena. Last year, he struck a roughly
$19 billion deal to buy software firm CA Technologies, formerly
The Symantec business will add an expected $2 billion to
Broadcom's annual revenues going forward, Broadcom said, and would
generate savings of more than $1 billion by eliminating cost
overlaps in the year after the deal closed.
After the deal closes, Broadcom will own the Symantec brand
name, the two companies said.
Broadcom said it would maintain its dividend policy but use
excess cash to pay down debt, rather than repurchase shares. The
chip maker maintained its guidance of generating $22.5 billion in
revenue for the current fiscal year that ends in November.
Broadcom's efforts to diversify into software through
acquisitions have gained particular importance after the chip
maker's attempt in 2018 to buy rival Qualcomm Inc. failed.
President Trump blocked that proposed takeover, citing security
risks. Broadcom has since moved its headquarters from Singapore to
to help alleviate such national security concerns.
Tech companies have been splurging on software acquisitions,
with large deals and many small ones. Salesforce.com Inc. Wednesday
announced the $1.35 billion acquisition of ClickSoftware
Technologies Ltd., which works on workplace management software.
Microsoft Corp. last week acquired a small software provider,
BlueTalon, for an undisclosed amount to bolster its cloud-computing
Shares of Symantec surged more than 12% Wednesday after The Wall
Street Journal's report, and climbed further on Thursday. Shares
had fallen sharply in July after the two companies failed to reach
an agreement on the terms of a full-company sale. Broadcom shares
were flat in after-hours trading Thursday following a slight uptick
at the close.
Symantec said it would pay a special dividend of $12 a share and
boosted a stock repurchase program by $1.1 billion to $1.6
Rick Hill, Symantec's interim president chief executive, said
the deal gave the company a narrower, but clearer, focus on the
consumer cybersecurity business, which includes Norton antivirus
products, on track for success.
Symantec is the world's largest seller of security software for
corporate networks, but its consumer business is far more
profitable, generating operating margins of roughly 40%, according
to a Bernstein Research note. Still, Broadcom investors may welcome
the narrower acquisition because corporate-security software is a
better fit than the consumer products with its overarching
strategy, the note said.
Separately, Symantec reported an 8% increase in sales to $1.25
billion for the first quarter of its financial year. It swung to a
$0.04 per share profit in the period from a $0.12 per share loss
for the year-prior quarter. Symantec also announced plans to cut
around 7% of its employees and close facilities as part of a new
For Symantec, the deal should help it leave behind turmoil of
recent years, including accounting issues that led to restated
financials and executive departures. In May, Symantec's former
Chief Executive Greg Clark resigned abruptly, and its chief
financial officer, chief operations officer and chief marketing
officer have also recently departed. A year ago it drew the
attention of activist investor Starboard Value LP, which struck a
settlement for board representation.
Write to Asa Fitch at firstname.lastname@example.org
(END) Dow Jones Newswires
August 08, 2019 17:48 ET (21:48 GMT)
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