Broadcom is reportedly in talks to buy cybersecurity firm Symantec within weeks, according to sources that spoke with Bloomberg.
Neither company would comment publicly. In early trading on Wednesday, Symantec’s shares rose 15% to $25.43. The company topped $4 billion in revenues in 2017 and has more than 12,000 workers. Its market value is more than $14 billion.
Broadcom’s stock dropped 3% in early trading Wednesday to $285.92. Its market value is more than $110 billion. The company is one of the biggest U.S. chipmakers, with a broad portfolio that includes software products. Revenues in 2018 were $20.8 billion.
In its second quarter financial statement of June 13, Broadcom announced revenues of $5.5 billion, up 10% from a year earlier. That included contributions from CA Technologies, purchased by Broadcom in 2018 for $18.9 billion in cash. Broadcom expected $22.5 billion in revenues for fiscal 2019, ending Nov. 3, but then shortly later said revenues would be $17.5 billion due to the economic and political uncertainty over U.S.-China trade tensions.
Analysts predicted Broadcom CEO Hock Tan would need to cut costs if the Symantec acquisition moves ahead. Symantec would be a “perfect fit” for Broadcom, Piper Jaffray analyst Harsh Kumar said in a note to investors. He also called the CA acquisition “extremely successful.” Wedbush analyst Dan Ives said Symantec could be a “cash cow machine on the consumer front” for Broadcom.
Tan played a role in helping consolidate the chip industry in recent years and was behind the hostile attempt to buy rival Qualcomm for $117 billion before U.S. President Donald Trump blocked the transaction in March of 2018 citing national security.
Symantec seems ripe for the picking, with the quick departure of CEO Greg Clark on May 9. Shares dropped 33% in 2018 after a financial investment led to restated earnings, but gained back about half those losses in 2019.
If history is any guide, it could be interesting for chipmaker Broadcom to buy a security software company like Symantec. Intel bought security firm McAfee in 2011 for $7 billion and then ended up spinning it off in 2016 to TPG for about $4 billion. Intel had wanted to integrate McAfee security software into Intel’s PC processors.