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Broadcom to buy software firm CA Technologies

Surprise announcement takes the chip-making giant to new territory

Broadcom will primarily benefit from CA’s recurring revenue, rather than operational synergies.
Broadcom will primarily benefit from CA’s recurring revenue, rather than operational synergies.

Broadcom has announced a surprise $18.9 billion deal to buy business software company CA Technologies, venturing far beyond its traditional semiconductor business, Reuters has reported.

Broadcom manufactures chips used in smartphones, computers and networking equipment. CA Technologies on the other hand sells software for mainframes, virtual machine and cloud computing environments. Experts quoted by Reuters believe Broadcom will primarily benefit from CA’s recurring revenue, rather than operational synergies, since the two companies occupy disparate corners of the IT industry landscape.

The CA deal comes just four months after the US Government blocked Broadcom’s hostile bid to buy semiconductor maker Qualcomm, arguing it posed a threat to U.S. national security and concerns the company would erode the United States’ lead in mobile technology and give China the upper hand.

Broadcom was at that time headquartered in Singapore. Since then, Broadcom has moved its headquarters to the US.

Last year, Broadcom acquired networking gear company Brocade Communications Systems for $5.5 billion. Brocade’s networking gear often connects to mainframes provided by IBM, and those are the same mainframes that CA’s software caters to, which provides some justification for the acquisition.

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