Broadcom today said that it will buy Israeli start-up Provigent for $313 million, net of cash assumed. The cash can bring the pricetag to around $340 million. What attracted Broadcom to Provigent?
The reason for the acquisition is seen in the graphs that Broadcom appended to the deal, which show that the market for IP-based equipment for wireless data communications to network cores totaled $5.2 billion in 2010, and is expected to grow by 18% a year. This growth rate is well above the growth rate for the semiconductor industry as a whole.
Lazard Investments analyst Daniel Amir told "Globes", "This is the basis on which Broadcom will build its strategy in the wireless infrastructure field." He said that while the price was high, it was not unusual given what Broadcom will get.
Broadcom, which has a market cap of $21.7 billion, plans to add Provigent's employees to its Israeli R&D center.
"We buy companies for their people and technologies," says Broadcom VP business and strategic development Shlomo Markel, who is responsible for mergers and acquisitions.
Provigent may also offer another motive for Broadcom. The company has an especially interesting customer base, beginning with China's Huawei Technologies Co. Ltd, and telecommunications equipment vendors, such as Ericsson AB (NYSE: SAX: ERIC), Alcatel Lucent SA (NYSE; Euronext: ALU), and Ceragon Networks Ltd. (Nasdaq: CRNT; TASE:CRNT).
Provigent's closeness to Huawei was a reason for worries following the earlier "Globes" report about the pending deal a few weeks ago. The Chinese generally dislike, to put it mildly, reports about their business relations with Israeli companies, an issue that Israeli companies are quite familiar with.
Published by Globes [online], Israel business news - www.globes-online.com - on March 21, 2011
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