Broadcom buys Brocade for data centre cloud

The chip industry has been undergoing rapid consolidation as companies try to capture market share, much of it related to connected devices and cars, and Avago/Broadcom has been one of the sector's most prolific acquirers.

The deal, the latest in a consolidating chip sector, will allow Broadcom to corner a larger share of the data center products market by using Brocade's fiber channel switches that speed up data transfer between servers and storage devices.

Singapore-based Broadcom, formerly Avago Technologies, is known for its connectivity chips used in products ranging from mobiles to servers, while California-based Brocade makes networking switches, software and storage products.

The market for IT infrastructure products is expected to expand rapidly. Total spending on cloud infrastructure, including server, storage and ethernet switches, will increase by 15.5 percent to $37.1 billion in 2016, according to research firm IDC.

Broadcom said it planned to sell Brocade's networking business, which makes controllers and access points that help businesses offer high-speed internet to their customers, to avoid competing with its top customers such as Cisco, Hewlett Packard Enterprise and Intel Corp.

Since taking over the top job at Avago a decade ago, Chief Executive Hock Tan has turned around a small chipmaker into a giant with a market capitalization of $67 billion.

As the chip industry has been undergoing rapid consolidation, the biggest chip deal ever, smartphone chipmaker Qualcomm Inc agreed last week to buy NXP Semiconductors NV for about $38 billion, making it the leading supplier to the fast-growing automotive chips market.