Big Data Storage Biz Has a New Leader: Avago (AVGO)

Jacob Harper |

As companies continue to collect terabyte upon terabyte of information, enterprise information storage has become big business. Specifically, it’s become the big business of big data. While corporations still try to parse what the massive stores of information they have – on customers, on market trends – actually mean, they first have to find someplace to sock the massive stores of data away. This has made enterprise storage one of the hottest business lines in the tech industry, with Avago Technologies Limited (AVGO) quickly positioning themselves as a market leader in the aftermath of the acquisition of a major player in that industry.

On Dec. 16 Avago announced they had ironed out the details to acquire LSI Corporation (LSI) , a move that both sides claim will create significant, immediate value for their stockholders. Following the $6.6 billion deal, Avago claimed they would save an estimated $200 million annually going forward.

To help finance the deal, Silver Lake Partners injected $1 billion in cash into Avago. In return, the investment firm is expected to receive a seven year, 2 percent convertible note priced at $48.04 per share, or stock at a comparable economic value.

The acquisition gives Avago a foothold into Big Data solutions, which will be integrated into the company’s already existing wired infrastructure and wireless lines of business. President and CEO of Avago, Hock Tan, was optimistic about his company’s future going forward, and said that "this combination will increase the Company's scale and diversify our revenue and customer base.”

Avago has had a respectable year prior to the deal, gaining 40.29 percent in value over the year.  LSI had struggled somewhat, notching only a 4.77 percent gain on the year.

However, LSI stockholders were rewarded for their patience on Dec. 16 as news of the buyout at $11.15 a share sent shares skyrocketing. By midday LSI had shot up a whopping 38.62 percent to hit $10.97 a share. The much-larger Avago likewise experienced a sizable uptick on the acquisition, rising 8.57 percent to hit $49.56 a share.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AVGO Broadcom Limited 164.22 1.43 0.88 2,694,460
NERO Neuromama Ltd. 58.00 0.00 0.00 0

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