Analyst Note| Abhinav Davuluri, CFA |
On July 12, The Wall Street Journal reported that Broadcom is in talks to acquire SAS Institute in a deal that would value the privately held software and analytics firm at $15 billion-$20 billion. Broadcom’s foray into enterprise software has picked up steam in recent years as the company bought CA Technologies and Symantec’s enterprise business. SAS boasts a suite of analytics software that could fit nicely with Broadcom’s existing software businesses tailored to enterprises. If the deal is successful, we think the breadth of software offerings could be used to increase switching costs for customers and thus strengthen Broadcom’s narrow economic moat. SAS generated $3 billion in sales in 2020, and according to its annual report, it is the only vendor named a leader in Gartner’s Magic Quadrant for Data Science and Machine Learning Platforms for all eight years of publishing. Our initial take on this potential deal is positive, and we are maintaining our $400 fair value estimate for Broadcom. We recommend that prospective investors wait for a wider margin of safety before committing capital to the company.