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Broadcom To Buy NetLogic For $3.7 Billion

Posted by Soulskill on from the bigger-fish-eats-smaller-fish dept.

An anonymous reader writes "Bloomberg reports that chip-maker Broadcom will be spending $3.7 billion to acquire NetLogic Microsystems in an effort to shore up their wireless infrastructure business. 'Customers such as Huawei Technologies Co. and ZTE Corp. use NetLogic processors in the equipment that controls the flow of video and other data across the Internet. The deal gives Broadcom, which also makes chips for mobile handsets, a more profitable way to harness the boom in tablets and smartphones, said Stacy Rasgon, an analyst Sanford C. Bernstein & Co.' The Register cites this as evidence that corporate tax breaks don't create jobs, as companies look to spend spare cash instead on acquisitions. The deal is expected to be completed during the first half of next year."

35 comments

  1. Tax Breaks by msobkow · · Score: 5, Insightful

    The Register cites this as evidence that corporate tax breaks don't create jobs, as companies look to spend spare cash instead on acquisitions.

    You'd think 15-20 years of offshoring and outsourcing would have made the governments of the world realize the only thing tax breaks do is line the pockets of big corporations. There is no "trickle down" effect any more. Companies don't "expand"; they "acquire." And then they cut duplicate jobs.

    --
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    1. Re:Tax Breaks by Anonymous Coward · · Score: 0

      Tax breaks allow CEO's to justify the multi-million dollar salaries they leech from the corporation. They are parasites.

    2. Re:Tax Breaks by El+Cubano · · Score: 2

      the only thing tax breaks do is line the pockets of big corporations. There is no "trickle down" effect any more.

      Umm, a very large number of people in the US with any sort of retirement savings have them in stocks of some form or another (either through direct ownership or through mutual funds). So, when a public company becomes more profitable, the price of its stock increases, which in turn helps out many people. But then, I guess I was always a "glass half full" sort of person.

    3. Re:Tax Breaks by SilverHatHacker · · Score: 5, Insightful

      Yes, but tax breaks buy votes. When you've only got four years in office before the next election, you've got to prioritize. Four years isn't enough time to actually fix anything that's broken, but it's enough time to campaign.
      There was a parable in the Bible that's kind of like this, about a guy who was about to be fired as manager of an estate so he went out and forgave everybody's debts. Cost the master of the estate a lot of money, but the guy was getting fired anyway and he ended up with a lot of friends who would keep him from ending up on the street. Government works the same way.

      --
      Funny may not give karma, but +5 Informative never made anyone snort coffee out their nose.
    4. Re:Tax Breaks by cromar · · Score: 2

      Silly me, I thought that was the reason governments give unreasonable tax breaks.

    5. Re:Tax Breaks by Anonymous Coward · · Score: 0

      The Register cites this as evidence that corporate tax breaks don't create jobs, as companies look to spend spare cash instead on acquisitions.

      You'd think 15-20 years of offshoring and outsourcing would have made the governments of the world realize the only thing tax breaks do is line the pockets of big corporations. There is no "trickle down" effect any more. Companies don't "expand"; they "acquire." And then they cut duplicate jobs.

      If you wanna fix the offshoring, repeal NAFTA and all other globalism race-to-the-bottom "agreements". Used wisely, tariffs are a good thing. A bit of protectionism is not evil. If you don't protect your nation and its jobs and its prosperity, do you think China is going to do that for you? No. They're going to wonder why you'd be so stupid as to sacrifice long-term viability for a couple of short-term percentage points while happily taking whatever work you don't want to do domestically.

    6. Re:Tax Breaks by jd · · Score: 1

      There have been times when Google have posted not merely record profits but record increase in profits but their share price has gone down because investors felt the profits should have been higher. Most of the Dot Coms posted negative income over their short lives and yet recorded massive increases in share value.

      The stock value has nothing to do with profits, it has to do with the rate of change of perceived net worth with respect to actual net worth.

      --
      It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)
    7. Re:Tax Breaks by MightyYar · · Score: 1

      You are trying to make a negative point about stock value in the context of assets for the everyman, and you pick Google??? Have you seen the chart? Pick the old GM or some other big corporation that tanked - not a stock that is up around 600% since it's IPO.

      The stock value has nothing to do with profits, it has to do with the rate of change of perceived net worth with respect to actual net worth.

      How does that change the parent's point? Don't improved profits increase the perceived value of the company? Unless you are a very short-term investor, being off by a few cents either way on earnings won't change your investment performance very much.

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    8. Re:Tax Breaks by bosef1 · · Score: 1

      I'm with you (and the Register) that in this case the tax breaks offered to Broadcomm went primarily into acquisitions, which will probably result in a net loss of jobs from the combined companies in the short term (who knows about the long term, but from the sound of things, Broadcomm really just wants to buy some patents anyway).

      I'm not sure I agree with you (and the Register) that tax breaks have been demonstrated to be useless in general. Of course, tax breaks "line the pockets of big [and small] corporations"; from the corporation's perspective, they represent a reduction in the cost of doing business, and those savings will of course be plowed into other things, like hiring more people, or paying better dividends, or acquiring other companies, etc.

      I argue that the particular companies and industries targeted by the tax breaks is also important. Giving tax breaks to fabless semiconductor firms doesn't seem like a good way to create a lot of blue-collar, middle-class jobs (which seems to be what we want and need). Instead, you'd expect to see a small increase in white-collar jobs (say, 100 EEs hired to design more microchips), and a small comensurate increase in crappy, no-growth, service industry jobs (secretaries, restaurant staff where the EEs eat, gas station operators, etc). Efficiencies of scale and simple wage division indicate your service industry growth won't be radically more than your white collar growth (crude estimate, 2-4x = 400-800 service jobs for 200 white-collar jobs).

      If you wanted to create blue-collar jobs with good mobility, you'd need to give tax breaks to, at least, semiconductor fabricators. And while that would probably temporarily create a number of good construction jobs building a new fab plant; with the levels of automation in the industry, I don't know how many jobs it would create to actually run the plant.

      My preference in this case would be a simplified tax code, with both a reduction in the base tax rate, and reduction in the tax break and exceptions, so that the net income to the government is the same, and everyone pays their fair share, and we don't have to waste a lot of money on crafty accountants and tax lawyers, who aren't producing any tangleable goods, or practical science or technology (whether the government should be taxing corporations at all is another discussion, I'm assuming we've agreed taxing corporations is possible and acceptable).

    9. Re:Tax Breaks by LordLimecat · · Score: 1

      Yes, but tax breaks buy votes. When you've only got four years in office before the next election, you've got to prioritize. Four years isn't enough time to actually fix anything that's broken, but it's enough time to campaign.

      Oh, I see. Four years isnt enough to do anything (which, Im sure, is a relief for Obama to hear), so we need to give Obama 4 more years. Obama 2012-- because the first four were just for practice!

      Also, if tax breaks dont do anything, any thoughts / commentary on the Regan years? I would be sincerely to hear your explanation for what happened after Reagan implemented his tax cuts.

      There was a parable in the Bible that's kind of like this, about a guy who was about to be fired as manager of an estate so he went out and forgave everybody's debts. Cost the master of the estate a lot of money, but the guy was getting fired anyway and he ended up with a lot of friends who would keep him from ending up on the street.

      My memory's not perfect, but Im pretty sure thats not how that went. I may be wrong, of course, so would be interested to see where you got that from.

    10. Re:Tax Breaks by benniaoxianfei · · Score: 1

      Now governments on tax issues in the comments, the export tax has also been adjusted, with the economic crisis of the Second Coming, the tax again on the agenda, which is a clear case http://www.aliexpress./ com/fm-store/905884/210974834-486393252/Free-shipping-Special-Treatment-Model-TB-00-Exclusive-Series-40-inch-folk-guitar.html

    11. Re:Tax Breaks by Kjella · · Score: 1

      Also, if tax breaks dont do anything, any thoughts / commentary on the Regan years? I would be sincerely to hear your explanation for what happened after Reagan implemented his tax cuts.

      The difference lies in the confidence of the market, back then they still wanted to invest. Right now it's like giving a ship that's battened down the hatches new sails, they'll stuff them away and when you ask why they're not setting sail they'll look at you like you're crazy and point out the gloomy outlook. So they'll keep the savings and consolidate, they might buy out some others to be ready to leap when the market recovers but they won't expand now. Of course this is all a bit of a Catch 22 since the market won't recover until someone invests, but right now it's not working and it's killing the public sector and building a huge budget deficit which is something Europe is collapsing under right now. In other words most of the warning sirens and red lights are going off in the heads of the investors. Right now investors are taking in the full cost and maybe then some to repay government spending and then it turns out the looming debt pretty much negates the positive effects of the spending. The whole system has become a bit disrobed to show the government only redistributes wealth, it doesn't create it. Tax breaks one place has to be compensated some other place and they can't push any more debt on the next generation.

      --
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    12. Re:Tax Breaks by Grishnakh · · Score: 1

      The interesting thing is, the corporate tax rate in the USA is one of the highest in the world. However, most big companies here don't pay that rate, because they pull all kinds of tricks, such as basing themselves in someplace like Bahamas even though they don't really do anything. Of course, the small companies are screwed.

      If the US government actually bothered to enforce its tax laws on the large corporations, then they'd bring in a lot more revenue to fix the budget problem.

    13. Re:Tax Breaks by Anonymous Coward · · Score: 0

      Yes, one thing they didn't point, out, mismanagement like that was punished with bodily harm at that time, today, politicians get pats on the back for a job well done. Things will have to get really really bad before anything will change, and even then you don't have a guarantee the change will be for the better.

    14. Re:Tax Breaks by coinreturn · · Score: 1

      The only trickle down the common man feels is of the golden shower variety.

    15. Re:Tax Breaks by SilverHatHacker · · Score: 1
      Luke 16, the parable of the shrewd manager.

      Jesus told his disciples: "There was a rich man whose manager was accused of wasting his possessions. So he called him in and asked him, 'What is this I hear about you? Give an account of your management, because you cannot be manager any longer.' "The manager said to himself, 'What shall I do now? My master is taking away my job. I'm not strong enough to dig, and I'm ashamed to beg– I know what I'll do so that, when I lose my job here, people will welcome me into their houses. So he called in each one of his master's debtors. He asked the first, 'How much do you owe my master?' 'Eight hundred gallons of olive oil,' he replied. The manager told him, 'Take your bill, sit down quickly, and make it four hundred.' Then he asked the second, 'And how much do you owe?' 'A thousand bushels of wheat,' he replied. He told him, 'Take your bill and make it eight hundred.'

      Kind of sounds like a politician to me. He's about to lose his job because he's wasting someone else's money, so he goes out and makes as many friends as he can so he won't have to work.

      --
      Funny may not give karma, but +5 Informative never made anyone snort coffee out their nose.
    16. Re:Tax Breaks by Anonymous Coward · · Score: 0

      Oh, I see. Four years isnt enough to do anything (which, Im sure, is a relief for Obama to hear), so we need to give Obama 4 more years. Obama 2012-- because the first four were just for practice!

      The same could be said for Bush, or really any President that ran for a second term, good job trying to make this a partisan issue.

  2. Why would they do that !?! by dev536 · · Score: 1

    Didn't profits of NetLogic sunk dramatically this year? Its actually right on the edge of bankruptcy.
    So to spend that much??? Are they crazy, that all I could think off.

    1. Re:Why would they do that !?! by jd · · Score: 1

      Broadcom have a... reputation... that could indicate them being a few bits short of a byte. 8 of them, probably.

      --
      It's a small world and it smells funny; I'd buy another if it wasn't for the money; Take back what I paid (SoM)
    2. Re:Why would they do that !?! by SexyKellyOsbourne · · Score: 1

      The fact that NetLogic has patents that would take 5 years for Broadcom to rival makes it a very worthwhile investment.

      But I found those that first link very informative however. All investors do need to read that, especially with the ongoing lawsuit.

    3. Re:Why would they do that !?! by fuzzyfuzzyfungus · · Score: 1

      I miss the days when their (then?) CEO was still in the news. Your garden variety tax-dodging and securities fraud are boring; but a CEO who secretly builds a sex dungeon under his mansion while his wife is out of town, or is accused of drugging drinks during business meetings, that is almost enough to make me forgive the state of BCM linux drivers...

    4. Re:Why would they do that !?! by Steve+Blake · · Score: 1

      NetLogic owns the TCAM market. You can't build high-end router without TCAMs.

    5. Re:Why would they do that !?! by AaronW · · Score: 1

      Maybe not for long though.. Disclaimer: I work for Cavium, a competitor to NetLogic.

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    6. Re:Why would they do that !?! by causality · · Score: 1

      I miss the days when their (then?) CEO was still in the news. Your garden variety tax-dodging and securities fraud are boring; but a CEO who secretly builds a sex dungeon under his mansion while his wife is out of town, or is accused of drugging drinks during business meetings, that is almost enough to make me forgive the state of BCM linux drivers...

      Collectively, in an almost unconscious, hypnotic, not-deliberately-planned sort of manner ... there is a strong tendency to train, nurture, and greatly reward the sociopaths we breed in numbers. It makes said fevered egos think they are completely invincible and may do anything they please, confident their wealth and connections and status will get them out of any real trouble. Until, of course, we are finally sickened or outraged and decide in a sudden way that they may not. That boundary determines what such people think they may get away with, either by hiding it or by all the times they got away with things for which "regular people" receive jail sentences.

      They certainly don't decide not to indulge a temptation because of a standard of taste, decency, civility, compassion, or other concern for their fellow humans. That particular CEO just thought he'd never get caught. Others, like officials in high places who don't even pay their taxes, rely on the confidence that they'll never be held accountable for what they otherwise make no secret about.

      The reason so many people tolerate this is that so many of them aspire to be like this. You have to let the existing power do what it wants, else you can't do what you want when you become the new existing power. There are precedents to consider, but otherwise it's entirely ego.

      You miss it because it's novel, unusual, maybe even shocking. It's something other than "garden variety" to you and thus a little beyond what you are accustomed to tolerating and accepting as normal. It's a strange reason to miss something when you (really) think about it. Contrast that with missing something because it is inherently virtuous in a way that you really appreciate and consider a privilege to know and you'll see what I mean.

      --
      It is a miracle that curiosity survives formal education. - Einstein
  3. Hahahahahahaha! by Alex+Belits · · Score: 2

    Hahahahahahaha!
    No, really,
    Hahahahahahaha!
    HAHAHAHAHAHAHAHAHAHAHA!!!

    --
    Contrary to the popular belief, there indeed is no God.
  4. Broadcom's Suspicious Acquisition Track Record by infaustus · · Score: 1

    I wonder if Broadcom is issuing any stock warrants to NetLogic's customers.

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  5. This is going to end up in court, big time. by SexyKellyOsbourne · · Score: 1

    What the article doesn't point out is that is that there is a strong possibility of a class-action lawsuit on the payouts of shares, as the Board of Directors of NETL did not properly hold the sales process and shop it out.

    It seems that $50 for what was a $30 share a few days ago is quite generous, but there's a rather long legal history of boards that breach their fiduciary duties getting into serious legal trouble.

    The fact that something like a dozen law firms are already trying to get involved the second this happened shows something is quite fishy about it. Some snippets from google news:

    http://www.marketwatch.com/story/harwood-feffer-llp-announces-investigation-of-netlogic-microsystems-inc-2011-09-12
    http://www.pr-inside.com/netlogic-microsystems-inc-takeover-under-r2806236.htm
    http://eon.businesswire.com/news/eon/20110912006442/en/netlogic/NASDAQ%3A-NETL/netl

    1. Re:This is going to end up in court, big time. by darth+dickinson · · Score: 1

      The fact that something like a dozen law firms are already trying to get involved the second this happened shows lawyers are opportunistic bastards that would sue their own mother if they thought she'd settle.

      There, FTFY.

  6. How cute by slack_justyb · · Score: 1

    Ah, someone mod this guy up. It seems like he truly believes the system still works. If only we had 6.72 million more copies of this guy, he might be right*.

    *Also all 6.72 million would need to be filthy rich.

  7. MOD parent up by mrand · · Score: 1

    Parent is exactly right - there is nothing fishy about law firms immediately putting out press releases about pending "investigations" when a public company gets an offer to be bought. Just go research any notable purchase over the past few years. It's really sad.

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  8. Comment removed by account_deleted · · Score: 1

    Comment removed based on user account deletion

  9. Did you just peek outside your Y2K shelter? by Anonymous Coward · · Score: 0

    I wonder if Broadcom is issuing any stock warrants to NetLogic's customers.

    The article you are linking is from 2001. Did you just peek out from your Y2K shelter? Go back in.

  10. TROLL by Anonymous Coward · · Score: 0

    This guy is a troll. Neither of the links has anything meaningful to offer.

    Go take a look at the Netlogic income statement. They made $400m last year and have $100m in the bank with no debt. The GAAP profit is negative, but that's because of their own acquisition expenses.

    http://finance.yahoo.com/q/is?s=NETL&annual

  11. how brain dead do you have to be to be an Analyst? by Anonymous Coward · · Score: 0

    Per the article -- "The deal gives Broadcom, which also makes chips for mobile handsets, a more profitable way to harness the boom in tablets and smartphones, said Stacy Rasgon, an analyst Sanford C. Bernstein & Co."

    Broadcom is buying chips for networking infrastructure. Yay big boxes that sit in some closet or office that most of us will never even see. Nothing to do with tablets and smart phones here. Just how brain dead do you have to be to be an analyst?

    People will find a correlation where they want to find one.

    Also, what does this have to do with tax breaks? Companies will do what is good for themselves. They will hire people only if it makes sense or they will no longer be in business.

  12. NetLogic must be happy by geoffaus · · Score: 1

    Finally they might get invited to some good parties! http://www.theregister.co.uk/2008/06/05/henry_nicholas_indicted/

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