Late last year, The Burn-In reported Broadcom is looking to sell off some of its non-core chip segments to grow its software division. Although the corporation is one of the world’s largest component manufacturers, its leadership has sought to bolster its software holdings. On December 31, Silicon Valley Business Journal revealed the firm had made arrangements to purchase cybersecurity company Bay Dynamics.
On December 19, Broadcom filed with the U.S. Securities and Exchange Commission to make the 19-year-old firm its latest subsidiary.
Why Broadcom Bought Bay Dynamics
Founded in 2001, the New York City-centered Bay Dynamics has established itself as a small but meaningful presence in the field of enterprise cybersecurity.
The firm specialized in providing solutions that allowed its clients to detect and neutralize threats to their networks preemptively. By analyzing vast quantities of data, the company’s platform creates models that forecast the behavior of malicious users and compromised systems. It also gives its clients the data they need to deal with emerging internal and external security problems.
Prior to its acquisition, Bay Dynamics provided services to Comcast, NBC, and the UBS investment group.
Notably, the cybersecurity organization has dealings with one of Broadcom’s other subsidiaries in the past. In 2017, the firm worked with Symantec to develop its cutting edge “Risk Fabric” analytics platform. As part of the partnership, the renowned utility offered Bay Dynamics’ core product to its corporate users.
Last August, Broadcom purchased Symantec’s enterprise segment for $10.7 billion. As of this writing, neither the chipmaker nor Bay Dynamics have announced the financial details of their merger. However, before being purchased, the firm had raised $31 million in two funding rounds. Moreover, in 2016, research firm PrivCo. valued the cybersecurity concern at between $100 billion and $500 billion.
Why Broadcom is Investing in Software
Like many semiconductor corporations, Broadcom faced many challenges in 2019. Due to the U.S.-China trade war, the firm had to deal with tariffs that increased logistics costs and the blacklisting of some of its Sino customers. As a result, the firm revised its fiscal year earnings down by $2 billion in July.
That said, CEO Hock Tan had a plan in place to deal with the uncertainties of the global component’s industry. In 2018, the corporation acquired systems software company CA Technologies for $19 billion. The following year, the chipmaker doubled down by buying Symantec’s enterprise business for $10.7 billion. As a result, the firm has gradually reduced its reliance on its hardware segment to generate income.
Indeed, in the fiscal fourth quarter, Broadcom’s software revenue increased by 134 percent year-over-year. Besides, with an estimated profit margin of 73 percent, the firm makes more from its digital platforms than its chips. By gradually transforming it into an enterprise cybersecurity powerhouse, the corporation’s leadership has dramatically diversified its revenue streams.
As such, Broadcom’s long-term financial stability is assured even in the face of international trade headwinds.