Broadcom Again Shows Its Commitment To Continuous Evolution

Broadcom (AVGO) has never been a company content to just sit still and play the hand it holds. Instead, management has always looked to maximize what it sees as the best long-term opportunities – exiting businesses with suboptimal return prospects (or high R&D requirements), and recently diversifying into the high-margin infrastructure software segment. Now it looks like further transformation is on the way, with management possibly looking to exit close to 40% of its semiconductor business while targeting new opportunities like silicon photonics and further infrastructure software bundling options.

Moving another year to the right does shift my fair value range higher for Broadcom, and I believe the semiconductor sector is bottoming out. What’s more, I believe that Broadcom remains a leader in several key businesses, including networking silicon, and I like the growth prospects of new ventures in photonics and base stations. Broadcom has clearly put itself in a different category relative to how many chip companies run themselves, but I continue to believe this is a case of “different is better” and that Broadcom is still a strong core holding candidate.

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Broadcom Again Shows Its Commitment To Continuous Evolution