At $27.50/share, that would equate to a price tag of about $17.6 bln.
The report is sending shares of the companies in opposite directions, with AVGO down 3% and SYMC jumping higher by 15%.
Click here to read Bloomberg's article.
This wouldn't be AVGO's first major acquisition. In fact, the company has been quite aggressive on the M&A scene. In late 2016, it acquired networking equipment company Brocade for $5.9 bln in a deal that naturally complemented its semiconductor, storage and data center products.
It followed that acquisition up with its surprising $18.9 bln purchase of CA Tech last November. As a mainframe software developer, there was virtually no overlap of product lines, putting AVGO in an entirely new market. Many scrutinized whether AVGO bit off more than it can chew considering how dissimilar the businesses are.
However, so far AVGO has proved the skeptics wrong as the integration appears to be progressing well. During its Q2 earnings call on June 13, its CEO commented that he remains confident that the company will meet or exceed the long-term revenue and profitability targets it laid out for CA. Additionally, he said that renewals in its CA business are strong and that commitments from its large customers are growing.
The successful integration of CA should provide some confidence that AVGO can pull off another major acquisition of a business outside its traditional scope. But, the stock action indicates that investors are less than enthusiastic about this potential deal.
There are several reasons why investors may be feeling skittish. First, SYMC is a company that has been struggling to keep pace in the highly-competitive cyber security space. Its revenue has declined in two of the past three quarters while competitors like Palo Alto (PANW) and Carbon Black (CBLK) are posting solid double digit growth, indicating that it is losing market share.
Furthermore, AVGO is still in the process of integrating CA. Adding another substantial acquisition to the mix may stretch management too thin, especially as it continues to grapple with challenges surrounding its core wireless business.
Last, AVGO took on $18 bln in new debt to finance the CA acquisition, ballooning its balance sheet to $34.0 bln in total debt. The idea that AVGO will likely need to push its debt load even higher may not be sitting well with investors.
Key Takeaways: AVGO has not been shy when it comes to making a splash in the M&A arena. And, for the most part, its track record has been impressive. But, turning SYMC into a margin and earnings enhancing acquisition may be its biggest challenge yet. Furthermore, since AVGO is still in the process of integrating CA, some may be questioning the timing of the acquisition.