It has leaked that semiconductor giant Broadcom (tkr: AVGO) is working to acquire CyberSecurity software company Symantec (tkr: SYMC).
Semiconductor investors are not fans of the deal as AVGO shares have traded off 6% since the news leaked. Conversely, we like the prospective acquisition for a couple of reasons:
- First, Symantec’s recurring revenues will help smooth semiconductor-related revenue cyclicality which ought to bolster AVGO’s valuation over time.
- Second, CyberSecurity is a large horizontal market opportunity that cuts across every industry vertical and is early in its long-term adoption cycle.
Were we advising Broadcom about a long-term Enterprise Software acquisition strategy, CyberSecurity would be at the top of our list.
Hats off to Broadcom CEO Hock E. Tan who is no stranger to large acquisitions having acquired Brocade for $6 Billion in November 2017 and Enterprise Software company CA Technologies for approximately $21 Billion in November 2018. It took courage for Broadcom to port its time-tested semiconductor M&A strategy to the Enterprise Software space. As we articulated in podcast episode 59, it is critical that CEOs and Boards dictate operating strategy rather than be dictated to by institutional investors. This requires that leadership teams proactively communicate their company’s story to investors so as to manage expectations.