Broadcom, after having denied the acquisition of Qualcomm earlier this year by Trump administration based on national security concerns, has decided to acquire CA Technologies showing one of the greatest shifts in an acquisition strategy from a semiconductor business to an IT Software and Solutions business. The proposed Qualcomm acquisition by once Singapore-based Broadcom had the likelihood of several 5G patents passing beyond US control.
The CA Technologies’ acquisition still gets over 1200 patents and mission-critical software deployments by CA Technologies at US Govt sites in the hands of Broadcom, and yet appears getting a green signal from the Trump administration. Negating the basics of acquisition with absolutely no or very little commercial synergies, the Broadcom’s objective to acquire ‘established mission-critical technology businesses’ is fully satisfied by this move which could be considered one of the most ambitious acquisitions of this size and scale in the recent times. Not to forget the Intel’s acquisition of McAfee which didn’t work well for the company due to little synergies between McAfee’s endpoint protection business and Intel’s core hardware strategy, finally resulted into a divestment of McAfee after seven years of rough marriage.
CA Technologies itself is built on a series of smaller acquisitions done in almost every segment of IT software – ranging from IT operations management, application performance, mainframes, DevOps, IT security and automation to analytics. CA Technologies has, however, had a good overall success rate of driving product and roadmap integrations to achieve expected synergies out of the acquisitions done in the past. Broadcom must consider using some of the CA management’s expertise gathered over a decade and more to drive this acquisition towards a successful business integration. There’s no similar business unit at Broadcom that delivers IT software or services, which should make it even easier for CA Technologies to continue operating under the larger shed without the need to make any immediate shift to operating strategy.
The dissimilarity of businesses and customer-base would only offer limited cross-sell opportunities arising from this acquisition in short to mid-term. However, CA Technologies’ recurring profitable bookings are guaranteed to bring stability by the increased future cash flow for Broadcom in the short term to accommodate for the expected fluctuations to its business due to the uncertainties arising from the recent (though still proposed and under review) US trade tariffs against semiconductor goods manufactured in China.
Besides mainframes which remain a majority revenue stream, and some other areas such as IT project & portfolio management, CA Technology has invested significantly in building its IT Security portfolio over the last decade, starting with Netegrity, IDFocus, Eurekify, Arcot, Layer 7, Xceedium, IdMLogic and Veracode – all within the Identity and Access Management (IAM) domain alone. CA’s aggressive acquisition strategy has kept innovation out of the company’s door for a long time and now with the Broadcom’s acquisition of CA Technologies there’s little hope that innovation will be the key to revenue generation for the new entity anytime in near future. With numerous acquisitions, CA’s Identity and Access Management portfolio has taken a bumpy ride over the past decade but despite all the challenges and long-term ramifications, its excellent IAM product and engineering team has ensured a seamless absorption of acquired products into its IAM and broader security software portfolio.
While the uncertainties will continue to loom over its acquisition objectives and alignment of synergies for some more time, it will be interesting to see how Broadcom would decide to nurture CA’s enterprise software and services business and where would that lead its still very well-positioned IAM product line.