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Despite the sharp fall in its stock price, Broadcom Corp. continued its buying spree Monday by stating that it would acquire-- for stock worth more than $1 billion--a Santa Clara company that develops chips for computer-network servers and storage systems.
Marking its first purchase of a profitable, established company, the Irvine semiconductor maker said it will issue 11 million shares- -the most for any of its numerous acquisitions so far--to buy ServerWorks Corp. Broadcom also could issue as many as 9 million additional shares if revenue targets are met.
"I think it's strategically a very important deal for Broadcom," said Eric Chen, a senior analyst at JP Morgan H&Q. ServerWorks could pull in about $300 million in revenue this year, he predicted.
In a tempestuous environment that has stripped two-thirds of its market value since August, Broadcom demonstrated its continuing ability to use its stock to buy new technologies, analysts said. Broadcom shares rose $6.44 Monday, or 7.4%, to $93.44 on Nasdaq on news of the deal.
"Even at today's stock price, the valuation of [Broadcom] is still rather healthy against some of the other semiconductor companies," Chen said.
The acquisition would open new markets for Broadcom with blue- chip customers such as Intel Corp., Compaq Computer Corp. and Hewlett Packard Co.
But it also could aggravate an already tense relationship with Intel, which has a close connection to...
