Dallas, Texas 12/19/2013 (FINANCIALSTRENDS) – Avago Technologies Ltd (NASDAQ:AVGO) has set a new course for growth by acquiring same-sized company LSI.
Avago is a semiconductor supplier to Apple Inc. Avago’s power amplifiers drive the 4G frequency bands on the new 5S, thanks largely to the safe and sophisticated RF filters the company builds. With Apple Inc, being just one of its wired and wireless networks components users, Avago boasts of many other big names in technology sector. The company’s earnings are in the range of $2.4 billion and is definitely considered an excellent buy, by most technology industry analysts.
Avago Technologies Limited (NASDAQ:AVGO), has since announced the acquisition of another networking component manufacturer for wired networks as well as storage solution- LSI. The storage data component provider is known to have an income of over $2.5 billion in 2012.
The consolidation of both these companies will give rise to a new breed of end-to-end component and technology solutions for networked wired and wireless solutions. For both the companies have unprecedent market segment in their respective niches.
While Avago Technologies Limited (NASDAQ:AVGO) boasts of optics networking solutions, LSI develops components and solutions that enclose these components.
Therefore, differentiated expertise is expected to complement and drive higher customer satisfaction. Besides, in financial terms as well the consolidation will led to greater wealth and funds creation.
Considering the fact that the original owners of Avago, Silver Lake will continue to hold a stake in the newly forged company, will hold in good stead with investors. In many ways, consistency and continuity in terms of management will always ensure fulfilment of goals already set.
The major fear thus far of the amalgamation is regulatory concerns. As both the companies operate in several countries across the world, approval will be a long drawn process. This is one of the major reasons for the companies pushing the date for the closure of the deal to the middle of next year.
Avago Technologies Limited (NASDAQ:AVGO) perceives Apple Inc as a very important buyer, not only for the high volumes transacted but also the scope to work on innovative and customized products. Typically, Apple Inc designs have lent themselves to repositioning some of the known technologies as well as pushing the envelope on many as with the requirement of 4 G technology frequencies for the mobile hand sets.
Avago’s expertise in building semiconductor components such as power amplifiers is definitely seen as the clincher for the company.
According to analysts, as the demand for 4G spectrum connectivity begins to drive the smartphone market, there will be a corresponding increase in the demand for components in line with this frequency. Avago with its already established component array, is expected to provide much of the necessary solutions in this space. As networks are reworked to host 4G connectivity the demand for the components is expected to rise at the industrial level as well!
However, in the recent years, new wave of semiconductor technology companies based out of Japan are ascending the scene- Murata and Taiyo Yuden – which are seen as direct competition to Avago core niches.
Amalgamation sees unprecedented growth
For Avago, the post-merger has seen the stock price of both the companies surge. The deal cost Avago $6.6 billion to buy out LSI.