Broadcom Buys Brocade for $5.9b

The chip making industry continues to consolidate.

Broadcom, whose chips enable much of the digital media industry’s technology, has entered into an agreement to buy network gear maker Brocade Communications Systems for $5.5 billion. Brocade, which recently acquired Wi-Fi deployer Ruckus Wireless, will add to Broadcom’s fiber products and its data storage businesses. Singapore-based Broadcom was Avago Technologies before it acquired US-based Broadcom and renamed itself Broadcom. Broadcom makes connectivity chips. Brocade makes networking hardware, software and storage products. Broadcom said it intends to integrate Brocade’s fiber channel storage networking products that are used in data centers and sell the company’s IP networking business.

Broadcom’s customers are gear makers such as Cisco, Hewlett Packard Enterprise and Intel. Broadcom will sell Brocade’s IP networking business, according to Brocade CEO Lloyd Carney, because it overlaps with some of Broadcom’s biggest customers. Brocade’s IP networking business consists of wireless networking, data center switching and software networking solutions, much of it acquired when it bought Ruckus Wireless for $1.5 billion last year. Prospective buyers are Broadcom customers such as Cisco, Hewlett Packard Enterprise and Huawei.

Hock Tan, Broadcom president and CEO said, “This strategic acquisition enhances Broadcom’s position as one of the leading providers of enterprise storage connectivity solutions to OEM customers. With deep expertise in mission-critical storage networking, Brocade increases our ability to address the evolving needs of our OEM customers. In addition, we are confident that we will find a great home for Brocade’s valuable IP networking business that will best position that business for its next phase of growth.”

A big part of Brocade’s IP networking business that Broadcom plans to divest was acquired as part of Brocade’s $1.5 billion acquisition earlier this year of Ruckus Wireless.

However the biggest chip deal ever was smartphone chipmaker Qualcomm’s agreement last week to buy Netherland-based NXP Semiconductors for about $38 billion, which makes Qualcomm, already the biggest maker of chips for smartphones, the largest maker of chips the booming automotive chips market. Avago had paid $37 billion for Broadcom Corp last year.

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