QLogic (NASDAQ:QLGC) announced on Tuesday it was acquiring Broadcom’s 10/40/100GbE controller assets for $147M in an allcash deal. In addition, QLogic paid $62M in a one-time fee to purchase Broadcom’s Fibre Channel licenses, simply as an “insurance policy” to protect the strong cash flows of their FC business.
Near-term, this acquisition should augment their market position in the FCoE market, though it could create some customer confusion with regard to the next-gen roadmap. However, longer-term, this acquisition should serve as a “lifeline” to growth, as network architectures converge to an all-Ethernet network. Prior to this acquisition, QLogic did not have a roadmap in the Ethernet market. Now they have access to market-leading technology and a roadmap to 40/100Gb Ethernet.
QLogic expects the deal to be EPS accretive in FQ1(Jun) and also for the full year FY15, adding $45M to revenue in FY15. Total revenue is now expected to increase 10-12%, though the ACP segment is expected to increase 17-19% y/y. Gross margin is expected to decline 2-3 points in FY15, though mgmt expects a neutral opex impact. The deal is expected to close in March, 2014, at which point the company will provide more color on the EPS impact.