A Wall Street analyst warns that Broadcom's reported bid for Symantec will raise questions - including why a chipmaker would want to buy a cybersecurity company with a sagging business

• Broadcom's reported bid to buy Symantec will likely raise questions on the chipmaker's strategy, a Morgan Stanley analyst said.
• Broadcom has been focusing more on buying software companies, but it's unclear what it hopes to gain from buying the struggling cybersecurity software giant, the analyst said.
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Broadcom's reported plan to buy Symantec doesn't entirely make sense and will likely raise questions on the chipmaker's strategy, a Morgan Stanley analyst said in a note.

Broadcom was reported to be in "advanced talks" to buy cybersecurity giant Symantec, which sparked a rally in the cybersecurity giant's shares this week. The stock closed at $25 Friday, up more than 20% from Monday. Broadcom's stock closed at $282.66, off 6% in the same period.

Broadcom was also reportedly considering buying cloud software company Tibco, according to CNBC.

If the reports are true, the move highlights Broadcom's plan to focus its M&A strategy on software companies, Morgan Stanley analysts Craig Hettenbach said in a note. But he said it's unclear what Broadcom would gain from buying the struggling software giant, he wrote.

Read more: Broadcom tells Wall Street it will focus on acquiring software companies, a year after the Trump administration squelched its $117 billion Qualcomm acquisition

"At a time of weak semiconductor fundamentals and considering the deterioration in Symantec's business, there will likely be many questions about" Broadcom's reported bid, Hettenbach said.

Symantec, considered a leader in security software, has wrestled with several issues recently, including missed Street expectations, management changes and the quarterly loss of 250,000 subscribers, Hettenbach wrote.

It would be hard to calculate the potential impact of the reported merger plan, "without knowing the deal price, cost cutting targets and potential divestitures," Hettenbach added.

The reported acquisition bid comes at a time Broadcom has been reeling from serious setbacks. The Trump Administration blocked its $117 billion bid to take over rival Qualcomm. The company last month also slashed its fiscal 2019 revenue outlook by $2 billion, citing the impact of the Trump Administration ban on Huawei.

Spokespeople for Broadcom, Symantec, and Tibco did not immediately respond to a request for comment.

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