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Leadership / Strategy

Broadcom CEO in Bullish Defence of CA Technologies Acquisition

Semiconductor maker Broadcom’s July acquisition of enterprise software  specialist CA Technologies left analysts and other industry watchers confounded. “Broadcom Buys CA – Huh?” and “Weirdest. Acquisition. Ever” were among some of the early headlines.

CA’s mainframe and enterprise software lines struck many as a deeply uneasy fit with Broadcom’s hardware business and on July 13 alone, the latter lost $10+ billion in market trading as investors took fright at the $18.5 billion cash acquisition.

(The deal still requires a positive vote from CA shareholders and antitrust approvals in the EU and Japan, both of which the company expects in Q4; it has already received approval under the Hart-Scott-Rodino Antitrust Improvements Act).

With Broadcom returning market-beating revenue figures in quarterly results Friday (powered in large part by growing demand for chips from cloud services providers); the company’s leadership wanted to be very clear on one point.

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“The number one question we get…” Broadcom CEO Hock Tan said on a conference call with analysts, “is why did we choose to buy [CA]?”

Broadcom CEO: “A Big Doorway to Engage Strategically”

Pointing to “exceptional cash flows” and strong cloud and enterprise data center spending as likely to drive Q4 revenues of $5.4 billion, up 11 percent from a year ago, Broadcom CEO Hock Tan said the company was well placed to pursue strategic acquisitions “to expand our earnings capacity going forward.”

On which note…

See also: Broadcom Shares Fall Staggering £10 Billion: But It May Just Be Starting a “Wierd” Shopping Spree

“Cut to the chase. We’re buying CA because of the customers and their importance to these customers. CA sells mission-critical software to virtually all of the world’s largest enterprises. These are global leaders in key verticals including financial services, telecoms, insurance, healthcare and retail. And CA does it a scale fairly unique to the infrastructure software space. This can only come from longstanding relationships with these customers that spend several decades. In other words, these guys are deeply embedded,” he told analysts.

broadcom ceo“Broadcom does a lot of business with the cloud companies, building the digital economy, the leaders. Google, Amazon, Microsoft are all large customers for us. They’re growing rapidly and we are, as you notice, growing as well. They use our leading edge silicon solutions to develop their next generation data centers to enable many businesses worldwide,” he said.

“On the other hand, when you look at the largest enterprises… these guys really have limited direct access to a mission critical technology. In that lies what we think is a new and huge opportunity. Just as we have done with hyper cloud players, we believe we can bring our compute offload solutions, our Tomahawk switches, Jericho routers, fiber optics and our server storage connectivity portfolio directly to these same large enterprises that are buying CA software. These large end users invest tens of billions dollars on IT infrastructure every year. Through CA, we believe we have a big doorway to engage strategically with these customers and provide them direct access at very compelling economics to… the same leading edge networking storage and compute technologies that are used to enable the cloud service providers today.”

So there you have it; not so wierd after all…

Long Live the Mainframe: A “Great Opportunity”

The Broadcom CEO wasn’t done: “Beyond this industrial logic, I might note, CA by itself is a great franchise. Mainframes remain the backbone of the enterprise computing environment and are relied on to run mission-critical applications…”

He added: “Contrary to popular belief, over the last 10 years, mainframe models have actually increased 3.5 times… Given mainframes are the most important parts of large enterprises, we believe this will remain a strong and stable market opportunity for us for long term. CA is a leader in delivering a suite of mainframe solutions across application development and ITOM tools. So, bottom line, we actually see this opportunity, a great opportunity, I may say, to double down for future growth.


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CBR Staff Writer

CBR Online legacy content.