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Broadcom CEO: I expect to buy more Israeli companies

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Monday, March 26th, 2012

As reported in Globes:

“We have lately accelerated the pace of acquisitions in Israel,” said Broadcom president and CEO Scott McGregor at a press conference today, in reference to the company’s five Israeli acquisitions since 2009. “I expect to continue acquiring more companies here,” he added.

This is not McGregor’s first visit to Israel, but it the first since he feels that Israel has become an integral and substantial part of the chip giant. Broadcom Corporation’s (Nasdaq: BRCM) presence in Israel has grown substantially in the past two years. After nine acquisitions in ten years, its Israeli development center is the company’s largest outside the US, with 500 employees.

Broadcom VP Shlomo Markel handles the company’s M&A operations, and he is the company’s top executive in Israel.

McGregor is visiting Israel in view of the rapid growth in the company’s local operations. Today, he attended the first conference of all Broadcom employees in Israel, and tomorrow, he is scheduled to meet President Shimon Peres.

“Broadcom’s DNA suits Israel,” says McGregor. “All our acquisitions here have been very successful, and the people have been well integrated with Broadcom. I believe that if there are more acquisitions, there is a strong chance that they will be well integrated with the company.”

As for the potential for future acquisitions in Israel, McGregor said, “Acquisitions are the main use for our cash, which currently total $4.5 billion. We intend to continue acquiring companies here. We’ve talked with almost every company here, but you don’t buy everyone you talk with. It’s no wonder that there are constant rumors about our possible acquisitions.”

As for areas of interest, McGregor said, “We focus on relevant home communications and wireless technologies, and in future, we’ll also seek here user interface and medical technologies.”

Broadcom is one of the companies most affected by the rapid growth in demand for mobile devices, such as tablets and smartphones. The company originally developed chipsets for TV and cable when it was founded in 1991. Over the years, it has expanded, partly thanks to an aggressive acquisitions strategy, and it currently offers chipsets for a wide range of products, ranging from infrastructures to home electronics, and devices’ communications technologies, such as Bluetooth and WiFi.

The company sees great opportunities in the tablets and smartphone markets. According to Credit Suisse, 11% of Broadcom’s revenue comes from Apple Inc. (Nasdaq: AAPL), which means that iPhone and iPad growth means growth for Broadcom. However, in the past year, telecommunications chipset developers have been facing a new rival – Intel Corporation (Nasdaq: INTC), which has been offering solutions for mobile devices. McGregor calls Intel a “competitor”, but says that the difference is that whereas Intel focuses on the processor, Broadcom focuses on complete systems, which is relevant for the integration of additional capabilities to the company’s chipsets.

Broadcom targets most of its products to end-users, a very volatile market, due to its exposure to the macroeconomic climate. “There is a definite slowdown in demand for digital televisions,” says McGregor, “but it is possible to see growing demand in most other segments. All in all, demand for some products is rising, and demand for some products is falling.”

Published by Globes [online], Israel business news – www.globes-online.com – on March 13, 2012