Chipmaker Broadcom lost nearly $16 billion in market capitalization a day after the company announced that it would buy software maker CA Technologies for $18.9 billion. The company's shares fell by 15 percent during intraday trading, taking its total market valuation to $89.4 billion. However, shares of CA Technologies surged about 18 percent during intraday trading after the announcement of the deal.
The acquisition of CA Technologies by Broadcom is considered to be as the leap into a completely different area of electronics with no significant overlap with the semiconductor industry. The Wall Street analysts are criticizing the Broadcom's plan to buy CA Technologies saying it will disturb the chipmaker's strategic focus. Cody Acree, an analyst at Loop Capital Markets, was quoted in media saying “What does Broadcom know about improving CA’s efficiencies? It is hard to bet against the guy in the long term.”
Tom Krause, Chief Financial Officer at Broadcom, shared in media,"Our model is to find value in the public markets where the existing investors don’t see it. This is something that we had been thinking about for a while."
He further said that because the two companies have no overlap, they won’t face the kind of regulatory scrutiny that has delayed or scuttled chip-related deals.
The only similarity that the two company shares are their appetite for acquisitions. CA Technologies has made nearly 17 purchases in the past ten years, and Broadcom has made almost 11 acquisitions in the last ten years.
Image Credits: New York Times