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Apple ( AAPL ) supplier Broadcom ( AVGO ) could follow its $37 billion Avago Technologies merger by shedding $1 billion in assets to launch another M&A charge, says MKM analyst Ian Ing. Ing reiterated his buy rating on Broadcom stock, but cut his price target to 160 from 163, citing wireless seasonality. Broadcom stock rose 1.7% Wednesday and was up a fraction in afternoon trading in the stock market today , near 131. The companies completed their merger on Feb. 1, taking the Broadcom name but keeping the Avago stock ticker. When announced last March, it kicked off a record-busting $100 billion in 2015 chip sector M&A deals. Analysts say the frenzy shows no sign of slowing as organic growth decelerates and costs rise. But the chip sector has been quiet on the M&A front this year. Broadcom will likely sell $500 million in assets to de-lever from its Q1-completed merger, Ing wrote in a research report. “For Broadcom, data center/networking product cycles have become more meaningful,” he wrote. “And the story increasingly revolves around a quick deleverage and return to semiconductor consolidation via accretive deals.” A number of small chipmakers — $2 billion and less market caps — are eyeing Broadcom’s design team and business units, Ing wrote. Although $1 billion would be a fast deleverage, half that is more likely. “We do not expect as significant monetization of Broadcom units as occurred with LSI,” Ing wrote. Avago acquired LSI in May 2014 for $6.6 billion, then sold LSI’s flash unit to Seagate Technology ( STX ) for $450 million and LSI’s networking business to Intel ( INTC ) for $650 million. Post-merger, Broadcom is less exposed to Apple, which is experiencing slowing iPhone sales. In January, a Credit Suisse analyst estimated 24% of the former Avago’s sales stemmed from Apple. The former Broadcom was 14% tied to Apple in 2014. Joined, Broadcom-Avago gets about 8%-9% of its sales from Apple, Ing estimated. Broadcom is slated to report fiscal Q1 earnings after the close March 3. Scalper1 News
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