Broadcom favors stock buyback over investing in innovation
“They spend a premium on acquiring, but they then [implement] ruthless cost cutting and raising prices to pay that debt down quickly,” Bickley said.
That’s been apparent since the company’s acquisition of virtualization software vendor VMware, where licensing prices have leapt upwards — although many customers have little choice but to continue to pay the spiralling prices.
Broadcom’s statement quoted CEO Hock Tan as arguing that the buyback is from a position of strength.
“Today’s announcement of a $10 billion share repurchase program reflects the Board’s confidence in the strength of Broadcom’s diversified semiconductor and infrastructure software product franchises,” Tan said. “In particular, we are uniquely positioned in mission critical infrastructure software and enabling hyperscalers to drive innovation in generative AI into their expanding subscriber platforms.”
As a practical matter, Broadcom’s relatively low stock price likely has less to do with Broadcom specifically and reflects an overall plunge in all stock prices, mostly due to Wall Street fears over the tariff war.
“Based on the skyrocketing annual revenues to over $50B in FY24, up from around $36B in FY23, increasing gross margins and free cash flow along the way, and driving EBITDA through the roof, it is clear the company is in solid financial shape,” Bickley said. The stock buyback now “is a smart business move.”
