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Avago Agrees to Buy Broadcom for $37 Billion

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Avago Agrees to Buy Broadcom for $37 Billion 

This article by Dana Mattioli, Dana Cimilluca and Shayndi Raice for the Wall Street Journal. Here is a section:

Neither Avago nor Broadcom has the kind of dominance over individual markets that better-known rivals such as Intel Corp. and Qualcomm Inc. enjoy, and a merger could help address that. In addition to consumer applications, Broadcom supplies the vast majority of chips used in the latest networking switches found in corporate data centers, a fast-growing business that could enhance Avago’s communications-focused revenue stream.

And

Researcher Dealogic estimated before the deal was announced that an acquisition of Broadcom valued at $35 billion would be one of the largest semiconductor takeovers ever, coming amid a burst of deals among such companies. So far this year, there have been more than $26 billion in semiconductor deals announced globally, not including the tie-up between Broadcom and Avago, according to Dealogic. That is more than double the volume in the same period last year and the largest year-to-date total since Dealogic started keeping records in 1995.

Eoin Treacy's view 

With interest rates so low and corporate spreads no longer contracting there has seldom been such an opportune time to borrow money. The flip side is that prices have increased in line with increased activity. Nevertheless demand for chips remains robust as the number of connected devices remains on a secular growth trajectory in line with the Internet of Everything theme.

Broadcom had been confined to an almost 15-year base and it took an acquisition to push it to new recovery highs. This helps to illustrate how focused the bull market has been on a select group of companies. As prices increase it is inevitable investors will look for promising companies that have not yet rallied which may represent catch-up potential.

Avago remains in a reasonably consistent uptrend and while somewhat overextended relative to the 200-day MA at present, a sustained move below $110 would be required to question medium-term scope for additional upside.

The results of this Chart Library Filter of the Nasdaq Composite Index highlight that there are a number of shares with similar long-term base formation completion characteristics. 

 

What Google Just Announced Is a Bombshell 

This article by Joshua Topolsky for Bloomberg may be of interest to subscribers. Here is a section:  For instance, while listening to music in Spotify you can search for more info on an artist, or if you're talking about a restaurant in WhatsApp, Google can pull up data on the place and even help you make reservations. And this is not a feature of the app itself, rather a helper that lives inside of the entire operating system.

This is a major move for two reasons. The first is that it really brings Google back to a place of dominance as the glue that holds your digital life together. The web has thrived and grown in no small part because of Google's ability to track, organize, and understand all of its disparate pieces. Now it's able to do the same thing with every app running on your phone. It allows Google to get back into the search game by speaking the common language of apps. It gives the company a second life with access to user behavior and needs.

But secondly, it starts to show how Google can be an interconnecting layer between the apps themselves — a kind of neutral staging ground between one action and another. This is a sea-change for how we use our mobile devices and how mobile apps interact with one another. Currently, we use OS-defined tools which let apps interact with each other (with rules defined by the OS-makers, not developers). But imagine if developers didn't have to think about how their work connects to the rest of your world? Imagine if Now on Tap is aware enough of the core functions of those apps that it can predict what you'd most likely want to do with them, and then execute on those needs?

Eoin Treacy's view 

We have become somewhat inured by Google’s announcements of what can realistically be described as vanity projects; plans for a massive new headquarters which had to be shelved being the most recent. However today’s release is important because it takes Google back into where it makes the vast majority of its money. I downloaded the Google search app onto my phone last week. The linking together of various different elements of search results is a positive development in my opinion. I’ve been using it more as a result and this type of user engagement should be beneficial for the company’s bottom line. 

 

China Most-Wanted: Nabbed in New Jersey 

This article from Bloomberg News may be of interest to subscribers. Here is a section: China’s most-wanted fugitive, an official accused of embezzling more than $40 million, is in U.S. custody, according to the Communist Party’s anti-graft agency.

Yang Xiuzhu, who fled China in 2003, was detained after entering the U.S. using a fake Dutch passport last year, according to the party’s Central Commission for Discipline Inspection.

In the first confirmation of Yang’s whereabouts in a decade, the commission’s International Cooperation Department said she escaped from detention in the Netherlands in May 2014 - - after being rejected for political asylum and before she could be sent back to China.

Eoin Treacy's view 

Considering the vast sums of money that change hands within state owned organisations my first reaction to this news was “Is that all?” $40 million might sound like a lot of money but is in fact very little when one thinks about the personal and family wealth accrued by the ruling cadres.

Nevertheless this is a PR coup for the Chinese administration. China’s anti-corruption chief and Politburo member Wang Qishan announced in March he will be visiting the USA this summer. Following today’s news we can now put that visit in a wider context. The Party wishes to throw media attention on members who have absconded with millions of Dollars while ensuring that the process of internal reform sustains the status quo. 

 

The Markets Now 

Monday 15th June, at the East India Club, 16 St. James’s Square, London SW1Y 4LH

David Fuller's view 

Here is the new brochure listing some of our topics and the important questions most investors face.  I think all investors will benefit from guest speaker David Brown’s new presentation. I learned from it, not least how to assess some familiar data more clinically.  In other words, he shows us how to think a little more clearly, particularly in terms of identifying bear markets near their tops.  This is never easy given all the emotions involved.  Many people jump the gun, as you will have seen over the last few years, which can leave them susceptible to overstaying when the important and often overlooked warning signs are flashing.  Note also Iain Little’s challenging topic summarised in the penultimate question.  I look forward to their presentations and also to hearing the views of friends and subscribers.  


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