Why Would Broadcom Want to Acquire Toshiba’s Memory Unit?



Toshiba selling to deal with asset write-down

Broadcom (AVGO) has been named as one of the bidders for Toshiba’s memory business, with reports that it could join forces with the Development Bank of Japan and the Innovation Network Corporation of Japan, a government-backed fund, to acquire the asset. Toshiba is selling its memory operation to deal with a massive asset write-down in the United States (SPY).

Why would Broadcom seek to acquire Toshiba’s memory unit? With the growing demand for memory products, the memory operation that Toshiba has put up for sale is a prized asset for any semiconductor company seeking a stronger presence in the storage business. With such an asset in its portfolio, Broadcom could be a stronger player in the memory chip market, where it competes with the likes of Intel (INTC) and Western Digital (WDC).

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Acquisition fuels revenue growth

The other reason Broadcom would be interested in getting ahold of Toshiba’s memory business is that it’s seen the benefits of strategic acquisitions. Its 1Q17 revenue of $4.1 billion, which soared 133.9% compared to a year earlier, was primarily supported by an acquisition. Broadcom was created when Avago Technologies and Broadcom Corporation merged in a $37.0 billion deal in 2016. Neither Avago nor Broadcom would have attained such growth independently.

Broadcom seems to be betting that acquiring Toshiba’s memory operations will help it accelerate its revenue growth. In a sign that Broadcom is embracing acquisitions to fuel growth, the company is also in the process of taking over Brocade (BRCD) in a transaction that it hopes to close in 3Q17.


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