Broadcom looks to grow networking business with $3.7bn NetLogic buy

Broadcom has made a move to expand its networking hardware operations with the $3.7bn acquisition of NetLogic Microsystems.

The deal, which values NetLogic at $50 a share, has been approved by both boards of directors and is expected to close in the first half of 2012.

California-based NetLogic produces hardware for use in networking appliances such as embedded multi-core and front-end processors.

"With NetLogic, Broadcom is acquiring a leading multi-core embedded processor solution, market leading knowledge-based processors, and unique digital front-end technology for wireless base stations that are key enablers for the next-generation infrastructure build-out," said Broadcom president and chief executive Scott McGregor.

"Broadcom is now better positioned to meet growing customer demand for integrated, end-to-end communications and processing platforms for network infrastructure."

The deal could also have an effect on the broader semiconductor market. Lee Ratliff, principal analyst for broadband and digital home at IHS iSuppli, told V3 that smaller firms may be nervous about the arrival of a large vendor such as Broadcom.

"Broadcom's big thing is integration. The first thing they do with a new operation is assimilate it into the Broadcom operation. NetLogic could find a place in quite a few Broadcom products over the coming years," he said.

Ratliff noted that wireless communications are expected to play a major part in the deal, but that the main focus will be in the enterprise networking hardware space.

"Although wireless is an important aspect of the deal, it's a small part. They are getting most of the revenues from wired communications," he said.