Chipmaker Broadcom to buy NetLogic for $3.7 billion

Chipmaker Broadcom Corp plans to buy NetLogic Microsystems Inc for about $3.7 billion to expand its line-up of chips used in wireless network equipment to take advantage of growing demand for mobile data services.The $50-per-share deal, which represents a premium of 57 percent over NetLogics close of $31.91 on the Nasdaq, sent NetLogics shares soaring 50 percent on Monday. But Broadcom shares were down 2.5 percent at $32.60 as some investors questioned the steep premium.Broadcom Chief Executive Scott McGregor defended the premium, noting that NetLogic would bring faster profit and revenue growth and that the addition of the products to Broadcoms lineup would double the size of the network equipment market it can go after to about $12 billion by 2015.Premier assets are going to cost more than a fixer-upper, McGregor told Reuters. Theyre a decent growth company. They accelerate our revenue growth and increase our market opportunity.Broadcom already sells different types of chips to the same network equipment makers that use NetLogic products. Broadcom chips help direct traffic across networks while the NetLogic chips are used to examine the type of data on the network so that it can be processed more efficiently.It doesnt bring us any new customers but it brings us new value for the customers we have, McGregor said.He said that Broadcom would continue to look for more acquisitions in the communications chip market.It would cost a lot for Broadcom to build the NetLogic technology itself, Williams Financial analyst Cody Acree said.Its a high premium but its a necessary premium. NetLogic has a huge amount potential, Acree said. Theyve developed a portfolio of products thats unique and difficult for Broadcom to reproduce.Shares of NetLogic rival Cavium Inc were up 5 percent at $32.47 on Monday as some investors hoped Cavium could also attract a suitor. However, Acree said that a stronger NetLogic could make it more difficult for Cavium to compete.The companies said the transaction has been approved by their respective boards and was expected to close in the first half of 2012.