Broadcom stocks fell as shares of VMware rose on Monday amid reports that chipmakers and enterprise software makers will merge.
On Sunday, Bloomberg reported the first talks Broadcom (AVGO) and VMware (VMW). VMware’s stock rose 18% to 113.29 in the morning trade on today’s stock market. Broadcom stocks fell 3.9% to 521.87.
With this move, San Jose-based Broadcom will add to the growing list of software resources. It was previously diversified into software with the acquisition of CA Technologies and Symantec’s security division.
Dell Technologies (DELL) last year closed most of its stake in VMware, the maker of virtualization software. By the time the market closed on Friday, VMware had a market cap of about $ 40 billion. He also owns the company’s cyber security assets.
VMware Stock: Solid Footing
“VMware is a cloud computing technology company with a strong position in the hybrid cloud market,” Ross Seymour, an analyst at Deutsche Bank, said in a note to clients. “If the negotiations are successful, we believe that such an acquisition would strengthen AVGO’s position in the enterprise / infrastructure software market.”
Cowen analyst Shaul Eyal said in his note: “Although the transaction is presumed in unconfirmed press reports and could still potentially be implemented, we see it as providing an additional tailwind to an overall healthy cybersecurity industry whose quality has shrunk dramatically in recent months.”
At BMO Capital Markets, analyst Keith Bachmann chose the deal from a VMware view.
“VMW’s subscription revenue has a long way to go to continue to change, which we believe could have an impact on revenue growth over the next few years and negative operating and free cash flow margins,” he said in a note. “Furthermore, we believe that there may be challenges in capturing VMW’s new cloud-native workload. Therefore, we believe that an agreement with Broadcom could give VMW shareholders a way out.”
He noted that VMW has about $ 9 billion in net debt.
Broadcom Stock: Earnings Outstanding
Financial second-quarter earnings for Broadcom stocks are scheduled for June 2.
Broadcom makes wireless chips for smartphones. It also makes semiconductors for broadband communications, networking, storage and industrial applications.
Also, semiconductor products accounted for 73% of Broadcom’s revenue in the second quarter. Infrastructure contributes 27% to software sales.
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Follow Reinhard Krauss on Twitter reinhardtk_tech For updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
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