Broadcom Collaborates With Chinese Companies To Boost Presence

After Cisco, Broadcom joins the Chinese firm partnership bandwagon as a part of collaborative strategy.

It seems like Broadcom Corporation (NASDAQ:BRCM) does not want to be left behind in taking advantage of China’s rise from being a cheap industrial manufacturing base to a center of innovation and information technology. The semiconductor solutions provider has formed a strategic partnership with three local manufacturing organizations to strengthen its regional presence in the Asian country. The collaboration will involve further innovation of home entertainment and digital home category.

Qualcomm and Cisco have taken the lead, with the latter announcing its plan earlier this month to spend more than $10 billion over the next few years in the country. The road is not likely to be easy as China is tightening its noose around global IT enterprises for their alleged involvement in the cyberwar, spying, and espionage charges, following prior allegations. It now prefers local indigenous IT companies for procurement of IT services now. Likewise, Chinese IT companies struggled to get a foothold in the US market.

Due to Chinese officials’ preference for local IT companies, whom they can trust on, Broadcom has formed a joint venture with a Chinese IT infrastructure products maker, H3C Technologies Co. Limited, for further exploration on the IT infrastructure platform. In addition, Broadcom has also formed a partnership with StarTimes (Beijing-based pay TV operator) and Inspur Group (Shandong-based systems integrator).

With Inspur Group, Broadcom will collaborate on the provision of digital home system in the 4K Ultra HD set-top box offerings for China, whereas the partnership with StarTimes will be focused on the production of low cost set boxes through the provision of engineering resources and Ultra HD home gateways.

Like Cisco, Broadcom Corporation is eyeing on opportunities, such as healthy LTE revenue growth, data center, and the next generation video products in a bid to diversify to new markets, such as automobiles, Internet of Things, wearables set, and next generation mobile technology.

In terms of Internet of Things (IoT), the semiconductor company is already making good progress on that front, if not catching up with Qualcomm and other IT companies, and is currently refreshing its portfolio to come up with new and advanced, yet meaningful features of it.

The corporate giant already enjoys a significant position in market. This collaboration can further add to its market presence and boost company vitals (revenues, profits, turnover, etc.).

Broadcom stock price ended the day at $52.11, a decline of 1.50% from the previous day, despite the announcement of the joint venture.

Cisco Systems Stock Is The One To Watch Out For Right Now

Better than expected results, high gross margins, and a complete focus on customer solutions to help propel the stock forward.

Last week, Cisco Systems Inc. (NASDAQ:CSCO) has reported its third quarter results, which were better than expectations. Revenue rose from $12.07 billion to over $12.15 billion, which is much lower than Cisco’s guidance of between $12.50-12.75 billion, even higher than analysts’ estimates.

The earnings from Cisco comes at a particularly critical time, as the company is about to see the handover of the position of chairman on board. John Chambers will hand over the ‘baton’ to Chuck Robbins In July. It is hoped that Mr. Robbins will continue the momentum of fiscal consolidation and the company’s future projects, consisting of home automation solutions and the Internet of Things (IoT). Tech analysts have welcomed the ‘changeover’, saying that Mr. Chambers was becoming a bit too headstrong and was at the helm for a long time.

Even though Cisco has a strong presence in the market in terms of its data networks, assuming that it is an aggressive innovator, the company needs to continue to keep it evolving because the tech industry is evolving at an even faster rate. Hence, it can be difficult to catch up with it.

This leads to the question: Is Cisco’s stock worth buying? No doubt that the company has a strong market share in switches, routing, data center network, but not so much at IP telephony and Wireless LAN. The challenges exist for the company in the market, as some rivals are competitive enough to steal the limelight.

Juniper Networks Inc., while not a threat without trouble, has managed to steal away Cisco’s dominance. Cisco’s market share for switches declined from over 65% to around 57%, whereas Jupiter’s switches market share rose from less than 2% to 3%. Even more significant is that Cisco’s market share for data center hardware has fallen from less than 59% to over 47%, whereas Juniper’s grew from 2.1 to 3%.

Cisco Systems also has to deal with Huawei in the Asian market, whose market share has grown from 7% to less than 13%. Here is the positive aspect though. Juniper and Huawei represent a sort of a fly that only needs some swatting from stealing market share here and there, though Huawei will be a bit of a tough proposition, though the Asian company looks solely to focus on the Asian markets for now, with little plans to expand in the US market.

The only near term challenge is that the company has to decide as to whether it wants to make a big shift to the software territory and face the risk of their hardware market becoming cannibalized. The SDN market is expected to grow to over $35 billion by 2018, so Cisco has to thread a fine line here from now then, so a decision must be made within this year.

Cisco stock price ended the day at $29.76, a gain of 0.71% the previous day.