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Broadcom Buys BroadLight

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In order to expand its broadband access portfolio, Broadcom Corporation recently announced that it will acquire privately-held BroadLight for approximately $195 million.

Based in Delaware, BroadLight had a subsidiary in Israel as well. Broadlight provides highly integrated networking and fiber access PON (Passive Optical Network) processors.

The acquisition will help Broadcom support customer requirements for rolling out next-generation fiber networks on a worldwide basis. 

The ubiquitous demand for increased bandwidth for IPTV services, HDTV broadcasting and high speed Internet access continues to drive momentum for deploying fiber networks.

Broadcom will pay the purchase price in cash except for that portion attributable to certain unvested employee stock options that will be paid in Broadcom restricted stock units.

The company will also reserve an additional $10 million in cash, which will be reserved reserved for future payment to holders of BroadLight capital stock and other rights upon satisfaction of certain performance goals.

Broadcom expects that the acquisition will be roughly neutral to the bottom-line in 2012, excluding any purchase accounting-related adjustments and fair-value measurements.

The company expects to close the acquisition in the second quarter of 2012.

Industry stalwart like Broadcom continues to be active on the acquisition front to expand its product portfolio. The company has an enormous cash balance as well which it uses to make strategic acquisitions. Last month, Broadcom completed the acquisition of NetLogic Microsystems, Inc. for $3.7 billion, announced in September 2011. .

NetLogic is a global fabless semi-conductor company, selling networking processors and integrated circuits. Its solutions are primarily used as high-performance systems in switches, routers, wireless base stations, security appliances and other various connected media components produced by original equipment manufacturers (OEMs).

We maintain our Neutral recommendation on the stock. Our recommendation is supported by Zacks #3 Rank, which translates into a short-term rating of Hold.

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