Broadcom is prioritizing stock buybacks over investing in innovation, planning to repurchase up to $10 billion of its common stock. This decision comes as disappointing news for IT departments, which were hoping for initiatives that would lead to more affordable products or innovations. Analyst Scott Bickley from Info-Tech Research Group stated that enterprise IT leaders shouldn’t expect immediate commercial relief, especially if they are contemplating significant capital expenditures on server technology.
Historically, Broadcom has favored acquisitions over in-house research and development. While its R&D spending is around 16% of revenue—on the lower end compared to the industry average of 15% to 22%—the company typically invests more in acquiring firms with established technologies. This approach is coupled with aggressive cost-cutting measures and price increases to manage debt from acquisitions. This was evident after Broadcom’s acquisition of VMware, which saw a significant increase in licensing fees that left many customers with limited options.
Broadcom’s CEO, Hock Tan, insisted that the share repurchase program signifies the company’s confidence in its diverse portfolio of semiconductor and infrastructure software products, stating that they are well-positioned to drive innovation in generative AI and support hyperscalers. Despite a declining stock price influenced by broader market trends, including concerns over trade tariffs, Bickley noted the company’s financial health, projecting revenues to reach over $50 billion in FY24—a robust increase from $36 billion the previous year. He justified the stock buyback as a strategic business decision given the company’s strong financial performance.
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