Broadcom Chief Executive Hock Tan has built a reputation for dealmaking that has transformed the chipmaker into a tech industry heavyweight.
His journey began in 2006 with Avago Technologies, where he kicked off a growth-by-acquisition strategy. In 2015, Avago acquired Broadcom for $37 billion and renamed itself after Broadcom, a move that not only rebranded the company but also positioned it as a big player in semiconductors.
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Tan’s acquisition-driven approach has expanded Broadcom's footprint well beyond semiconductors, encompassing enterprise software and cybersecurity.
Related: Analysts reboot Broadcom stock price target after earnings, bond sale
One of Tan’s defining moments came with the $5.5 billion acquisition of Brocade Communications in 2017. This gave Broadcom a foothold in networking technology, especially in data centers and storage, helping Broadcom diversify its offerings beyond its core semiconductor focus.
In 2018, Tan made headlines again with the $18.9 billion acquisition of CA Technologies, Broadcom’s first major move into software. In 2019, Broadcom acquired Symantec’s enterprise security division for $10.7 billion.
Tan’s most ambitious attempt was his $117 billion bid in 2018 for Qualcomm, whose 5G technology would have been a game-changer for Broadcom. The U.S. government blocked the acquisition due to national security concerns.
Tan’s M&A strategy has transformed Broadcom into a diversified tech company with balanced revenue. Broadcom retains high-margin, strategic assets from acquisitions and divests lower-margin ones, enhancing both revenue streams and margins.
"He runs Broadcom like an investment portfolio ... they are all independent fiefdoms," a former Broadcom employee who worked closely with Tan told Reuters. "If he has a dominant position in any market, he'll go in and raise those prices."
Shutterstock-T. Schneider
AI will continue to drive Broadcom’s growth
In September, Broadcom (AVGO) reported fiscal Q3 results that beat Wall Street estimates of revenue and earnings.
For the quarter ended Aug. 4, the company earned an adjusted $1.24 a share, topping the $1.20 consensus analyst forecast. Revenue of $13.07 billion surpassed the $12.97 billion expected.
The company posted a net loss of $1.88 billion for the quarter due to a one-time $4.5 billion tax charge related to internal intellectual-property transfers.
Broadcom stock is up more than 60% year-to-date, benefiting from artificial-intelligence demand. Tan said AI chip sales were expected to reach $12 billion in fiscal 2024, up from a prior forecast of $11 billion.
Related: Analyst revamps Nvidia stock price target after investor meetings
“Broadcom’s third quarter results reflect continued strength in our AI semiconductor solutions and VMware,” Tan said in a statement. Broadcom completed its $61 billion acquisition of cloud software company VMware last year.
Broadcom works with major tech companies. It supplies Apple with wireless chips for iPhones and collaborates with Google on AI infrastructure.
Analyst lifts Broadcom stock price target
Mizuho Securities raised its price target on Broadcom to $220 from $190 with an outperform rating on the shares. Mizuho sees artificial intelligence, custom silicon and networking tailwinds into 2025 and 2026, thefly.com reported.
"Broadcom's custom silicon business could see an opportunity of $16B or more if it wins OpenAl's chip business, starting in the second half of 2025 or 2026," Mizuho analyst Vijay Rakesh said, saying that the custom silicon market is heading toward a $56 billion valuation.
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Rakesh said that China’s push for its own language models and AI chips amid export restrictions, along with potential Amazon and Google custom silicon projects, could benefit Broadcom.
The analyst added that Broadcom and Nvidia remain dominant in graphics-processing-unit and custom silicon, while Arm and Micron are well-positioned in silicon IP and high-bandwidth-memory markets.
At last check Broadcom stock traded off 3.7% at $175.65.
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