I’m hearing rumors circulating that Broadcom is working on a deal to buy Symantec.
The rumor has street cred and makes a lot of sense. Chip makers are expanding into software in the face of possible Chinese sanctions. If you’re a chip maker and all your income derives from chip sales, and China makes up 20% – 50% of your chip sales, you’re in a bad spot if the Trump Administration puts a ban on chip sales to China. China is also looking at cutting its dependence on U.S. made chips. Chip makers are diversifying their revenue stream by expanding into software.
In 2011, Intel bought McAfee and has since worked a deal with Dell and other computer retailers to bundle McAfee with Intel chips on new computers. It makes a lot of sense that Broadcom would follow Intel’s lead and make a move to buy Symantec.
Symantec has a Current Ratio of 0.85. This indicates that SYMC is not financially healthy and could have problems in meeting its short term obligations. The company has a Debt to Equity ratio of 0.78 which again is not good. I think Symantec is in a bit of financial trouble and Broadcom could be the infusion of money they are needing.
While this is a trade short-term traders can make money off of, I’m not adding to SYMC stock to the long-term portfolio as the stock does not meet our stringent standards.
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