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Avago Is the Stock For the Mobile Age (AVGO)

Unless you’ve been living under a rock for the past few weeks — or have been on an exotic island with no WiFi, or on a yacht in the middle of the Mediterranean — you have heard of the mega-acquisition of mobile chip maker Broadcom (BRCM) by mobile chip maker Avago (AVGO).

Avago stock, AVGO, Avago TechnologiesThis is a big deal on a number of levels.

First, it’s literally a big deal; it’s a $37 billion deal that values BRCM at $77 billion.

Second, if all goes well with the Federal Trade Commission regulators, it will establish AVGO as the No. 3 semiconductor maker in the U.S. behind Intel (INTC) and Qualcomm (QCOM).

This could really shake up the mobile chip industry.

Third, AVGO has been on an acquisition spree recently, buying up complementary firms to add value to its offerings and eventually add support across its various lines. Incorporating BRCM will mean the new company will be major player in both Apple (AAPL) and Samsung (SSNLF) phones, from the iPhone 6 and 6 Plus and Galaxy S5, S6 and beyond.

In the past year or so, AVGO has purchsed data and storage chip maker LSI Corp (LSI) as well as more recently, enterprise specialist Emulex (ELX). BRCM fits into this strategy of growth by acquisition in non-competitive sectors.

Each acquisition brings with it something that helps AVGO’s bottom line while also helping to create a more attractive one-stop shop for its telecom clients.

Intel’s move for Altera (ALTR) confirms that the big chip makers are taking an active interest in consolidating their holds on the market.

It’s likely this is the beginning of an merger and acquisition spree among the big chip players to gain traction in the mobile sector. Plus, some of the players’ stocks have had good runs, so they’re using cash-plus-stock deals to grab some assets with high stock prices.

That’s what AVGO did. AVGO stock is up 43% for the year and analysts continue to be bullish on its prospects.

And that’s not surprising since AVGO and BRCM both are big suppliers to the most popular mobile devices on the planet. AVGO has proven with its other acquisitions that it is very good at getting all the value possible from its mergers. Bringing in BRCM should mean some really big quarters in the next year, after the deal is official.

And in the meantime, AVGO can tell its clients –– like AAPL and Samsung — it is going to be able to help them design the next generation mobile phones with most of the chips coming from under one roof and unique pricing abilities.

The deal means a lot for AVGO’s future and it is a very bright indicator on current trends in the mobile space. By next year you could be looking at entirely different competitive environment in the mobile sector once other industry players start to respond.

Remember, QCOM hasn’t made a move yet, nor have we’ve seen really small players start to talk mergers.

Whatever happens, AVGO has made it known that it plans to run with the big dogs and it seems everyone is bullish on that idea.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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