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Broadcom plunges after Wall Street demolishes company’s software strategy

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Broadcom CEO Hock Tan speaks as President Donald Trump listens during an event to announce the company is moving its global headquarters to the United States, in the Oval Office of the White House, in Washington.

Evan Vucci | AP

Broadcom CEO Hock Tan speaks as President Donald Trump listens during an event to announce the company is moving its global headquarters to the United States, in the Oval Office of the White House, in Washington.

Wall Street is buzzing over Broadcom’s befuddling strategy to acquire a low-growth software company.

On Wednesday after the market close Broadcom announced it had entered into an agreement to purchase software company CA Technologies for $18.9 billion.

Raymond James told its clients it was surprised by the deal announcement and questioned the company’s rationale.

“To say the deal came out of left field is an understatement. We see no obvious business synergies between Broadcom’s semiconductor business and CA’s Software business,” analyst Chris Caso said in the report Wednesday. “This deal, since it is so far afield from Broadcom’s core businesses, will likely cause significant confusion about the company’s strategy.”

Broadcom shares declined 16 percent Thursday, representing a drop in stock value of nearly $17 billion. The company’s market value was $105 billion as of Wednesday’s close, according to FactSet.

One Wall Street firm said the change in strategy to buy a software company versus its historical pattern of purchasing semiconductor companies will hurt management’s standing with investors.

“CA is a legacy software company that specializes in mainframes – shared synergies are not obvious,” Nomura Instinet analyst Romit Shah said in a note to clients Thursday. “More important is that this deal runs completely against the investment narrative that management has been articulating. … Management has stressed that Broadcom is focused on delivering shareholder value through organic growth, capital return and tuck-in acquisitions. This deal hurts management’s credibility, in our opinion.”

Shah reiterated his neutral rating and lowered his price target to $225 from $250 for Broadcom shares. The stock closed at $243.44 Wednesday.

Mizuho Securities said its clients are worried that Broadcom may not succeed in the software business given Intel’s previous trouble in the same industry.

“We are getting investor pushback with an unexpected surprise at a big software acquisition as it potentially strays from AVGO’s hardware focus with little overlap with current strategy,” analyst Vijay Rakesh said Wednesday in a note. “We believe investors are smarting from prior unsuccessful software M&A such as INTC buying McAfee and Windriver, both of which INTC recently divested to private equity.”

Rakesh reaffirmed his buy rating and $310 price target for Broadcom shares.

Broadcom did not immediately respond to a request for comment.



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Elon Musk apologizes to British cave diver following ‘pedo guy’ claim

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Elon Musk, co-founder and chief executive officer of Tesla Inc.

Patrick T. Fallon | Bloomberg | Getty Images

Elon Musk, co-founder and chief executive officer of Tesla Inc.

Tesla CEO Elon Musk apologized after making the baseless claim that a British diver involved in the Thai cave rescue mission was a pedophile.

The apology comes after the spelunker, Vern Unsworth, who was involved in the early days of efforts to save the now-rescued boys’ soccer team, threatened legal action against the billionaire executive over the comment.

Musk said on Twitter late Tuesday that he had made the claim out of “anger” because Unsworth had criticized his idea to rescue the boys with a “mini-submarine” made out of a SpaceX rocket part.

“Nonetheless, his actions against me do not justify my actions against him, and for that I apologize to Mr. Unsworth and to the companies I represent as leader,” Musk said.

“The fault is mine and mine alone.”

Musk got involved in efforts to rescue the group of 12 boys and their soccer coach earlier this month — mere days before their rescue. The boys had gotten stuck in the flooded Tham Luang cave in Chiang Rai after venturing through it with their coach.

He and a team of engineers from SpaceX and The Boring Company brought over the vessel — a cylinder made out of the liquid oxygen transfer tube of a Falcon rocket — to Thailand, and met with government officials there about the possibility of using it to help.

But Narongsak Osottanakorn, head of the command center during the rescue, did not welcome the idea, saying the sub was “technologically sophisticated” but “not practical” with the rescue mission.

Musk then hit out at reports referring to Osottanakorn as “rescue chief,” noting that he was the former provincial governor of Chiang Rai and claiming he was not the “subject matter expert.” Osottanakorn stepped down from his role to join the initiative.



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European Union is expected to fine Google $5 billion over Android: Reports

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Sundar Pichai, chief executive officer of Google

Michael Short | Bloomberg | Getty Images

Sundar Pichai, chief executive officer of Google

European Union regulators will slap Alphabet-owned Google with a $5 billion antitrust fine for abusing the dominance of its Android mobile operating system, according to reports.

The case relates to the dominance of Google’s Android operating system, which is one of the world’s most popular mobile software systems, competing fiercely against Apple’s iOS. The Android OS controls more than 80 percent of smartphones globally.

The EU has scrutinized that dominance, arguing that Google should look to make competition fairer and allow smaller players in the market to flourish. It is widely expected to fine the firm a record levy on Wednesday.

According to the Wall Street Journal, that fine will amount to 4.34 billion euros ($5.06 billion). The Journal, citing an official familiar with the matter, said the decision is not expected to be discussed at a meeting between EU Competition Commissioner Margrethe Vestager and other officials.

Shares of Alphabet, Google’s parent company, shed more than 1 percent during U.S. premarket trading.

You can read the full Wall Street Journal report here.



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Hedge fund billionaire Einhorn places sixth in major poker tournament

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Hedge fund billionaire David Einhorn plays poker at the World Series of Poker's "Big One for One Drop."

Joe Giron | World Series of Poker

Hedge fund billionaire David Einhorn plays poker at the World Series of Poker’s “Big One for One Drop.”

Hedge fund billionaire David Einhorn busted out of a $1 million buy-in poker tournament just short of taking home prize money, Tuesday night in Las Vegas.

Einhorn and 26 other businessmen and poker players each ponied up $1 million to enter the World Series of Poker’s “Big One for One Drop” tournament.

Einhorn survived two days of play and came into the third day with the fifth most chips of the 6 remaining players.

But, while other players were doing all they could to avoid getting eliminated, Einhorn didn’t seem to mind playing aggressively.

For his sixth-place finish Einhorn receives no prize money. Fifth place would have paid out $2 million.

Einhorn has been a regular at the World Series of Poker for years, always giving his winnings away to charity.

This year he played sporting a shirt that said “Service Year,” a charity that allows people to serve in the community for a year, and be paid for it.

Simply playing in the tournament was a charitable endeavor as $80,000 from each entry goes to the charity One Drop, an organization dedicated to sustainable access to safe water.



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