Broadcom to Buy NetLogic For $3.7B

In an effort to expand its microchip unit, Broadcom Corp. on Monday announced plans to buy NetLogic Microsystems for $3.7 billion to capitalize on the fast-growing demand for mobile data services – particularly smartphones.

Chipmaker Broadcom Corp. on Monday announced plans to buy NetLogic Microsystems for $3.7 billion in a bid to expand its microchip business, which is used in different wireless network equipment.

Scott McGregor, Broadcom chief executive, said that the deal would significantly expand the company’s market and would capitalize on the fast-growing demand for mobile data services – particularly smartphones.

McGregor explained that the expansion plans for the “addressable” market for Broadcom would be smoothly implemented, noting that the company is already catering to the same markets that also use NetLogic products.

The executive also noted that both companies’ board has already approved the transaction and expect the deal to close in the first half of 2012.

Based on the agreement, Broadcom will buy NetLogic for $50 per share, or 57 percent premium over the company’s closing price of $31.91 on Friday.

Following the announcement, NetLogic’s shares skyrocketed by 50 percent on Monday trading.

Despite the strong earnings and revenue promised by Broadcom executives, many analysts remained doubtful over the steep price of the deal.

But they also said that the premium price is “necessary,” saying that it would cost Broadcom more to build or replicated the same technology that of NetLogic.

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