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Daniel Snyder: But let’s go ahead and play Guess The Stock. Let’s get into this. So, you guys know how it goes. I list off a couple of facts about the stock. And if you think you know what it is, drop in the chat, what you think it is. You can do the ticker symbol or the company name, and we’ll let you know who gets it right.
So, first up, this large cap company is currently based out of San Jose, California, so U.S.-based. In 2019, the stock was announced the fifth best stock of the 2010 decade, with a total return of 1,956%. Both of the co-founders, both of their first names is Henry. You have Henry Samueli, who is the owner of the Anaheim Ducks, for all the hockey fans listening, and Henry Nicholas, who both went to UCLA and founded this company in 1991.
On August 09, 2019, news sources reported that this company had decided to acquire the Enterprise Security Business of Symantec Corporation, which the consumer software portion of which is now known as NortonLifeLock, a name most people know, and they acquired that for $10.7 billion in cash. Any guesses? Come — oh, I got to scroll down here. Sorry, guys. We got Jacob and John with the right answer. We are talking about Broadcom people. Ticker symbol, NASDAQ:AVGO. And the thing is, we got to give a shout to John. I think John kind of cheated a little bit. So, this recommendation actually came from John via Zoom…
Austin Hankwitz: Oh, got it.
Daniel Snyder: …here on the episode a few weeks back. John, we’re finally getting to Broadcom. We’re diving in today. Glad you’re here hanging out with us, buddy. So, let’s get into a history lesson real quick, because this is weird to me.
Austin Hankwitz: Please, please.
Daniel Snyder: All right. So, try to stick with me here. On November 18th, 1999, Agilent Technologies (A) IPOed to the tune of $2.1 billion as it was being spun out from a company that I know we all know called Hewlett-Packard (HPE), okay? So, it’s a division spinoff IPO to the public market called Agilent Technologies. KKR and Silver Lake Partners acquired the chip division of Agilent Technologies in 2005 for $2.6 billion and formed a new company called Avago Technologies, okay? So, we have Avago and we have Agilent.
On August 6th of 2009, Avago Technologies went public on the NASDAQ with the ticker symbol AVGO, which we now have. And on May 28th, 2015, Avago announced that it would buy Broadcom Corporation for $37 billion. It was $17 billion in cash and $20 billion in shares. And then, when the acquisition happened, Broadcom Corp — I’m sorry, Avago took the name Broadcom and, of course, kept the ticker symbol AVGO, which is why we have Broadcom and AVGO now.
Then, that Broadcom acquisition by Avago strengthened the patent position significantly, making the company the ninth largest holder of patents among the top semiconductor vendors, according to analysis done by technology consulting firm LexInnova. And I want to break this down. So, this is their article from 2015 is that Avago’s owned patent portfolio is small with around 5,000 patents and patent applications. But when combined with patents and applications assigned to its recent acquisitions of these five different companies, LSI, PLX, Emulex, CyOptics and Infineon (OTCQX:IFNNY), the number of patents in its portfolio rose to 20,304. However…
Austin Hankwitz: Wow.
Daniel Snyder: …that’s still slightly less than the 20,689 patent and applications that Broadcom has in its portfolio. So, it would rank ahead in patents of the combined merger, right, of Avago and Broadcom, combined it’s like 40,000 patents-plus, ranking them ahead of Taiwan Semi (TSM), Texas Instruments (TXN), STMicroelectronics (STM) and NXP Semi (NXPI), and this was back in 2015, so I don’t have all the updated numbers. It is only behind the three logic vendors being Qualcomm (QCOM), Intel (INTC) and Renesas (OTCPK:RNECF), which is a semiconductor company in Japan for those that don’t know, and then, again, the Samsung (OTCPK:SSNLF), Toshiba (OTCPK:TOSBF) and Micron (MU) and stuff like that. But talk about a company that thrives off acquisitions, right, patented…
Austin Hankwitz: That is unbelievable. So, I — actually, it was so funny you mentioned that, I’ve always wondered why it’s AVGO, right? It’s like Broadcom, maybe that doesn’t make any sense, but now it makes total sense. Wow. So…
Daniel Snyder: Andon top of that, real quick, I know you want to jump in, you got all the numbers and everything, but also to remind people, back in 2017, Broadcom proposed to purchase Qualcomm, right? Qualcomm, who had, what it is a 76,130 patents, they proposed to purchase Qualcomm in a hostile takeover attempt for $130 billion. But it was crushed by the U.S. government on safety concerns.
Austin Hankwitz: Man, we all love a good a hostile takeover, don’t we? Pesky U.S. government letting to stop…
Daniel Snyder: We haven’t touched on VMware (VMW) yet. Wish I know we’re going to get to.
Austin Hankwitz: Oh, gosh. All right. So, let’s talk about this $230 billion company, right? Ticker, AVGO. They describe themselves as a designer and developer of semiconductor devices, specifically those with a complex digital and mixed signal, complementary metal oxides, say that ten times fast. These CMOS chips are the same ones that power computers, consumer appliances, automobiles and even rocket ships. The company operates in two segments: semiconductor solutions and infrastructure solutions.
Over last 12 months, these — I’m sorry, over the last 12 months, the company of Broadcom has generated $33.2 billion in revenue. That revenue is split 78% in their Semiconductor Solutions Business segment and 22% in their Infrastructure Solutions Business segment. This $33.2 billion figure is up 21% over 2021 figures, and this was mainly catalyzed by strong partnerships with customers and the accelerated adoption of their next-generation technologies. We’ll talk about that here.
So, according to the most recent earnings call, they’re specifically optimistic about a few things in 2023 as it relates to their growth profile, where their CEO quoted saying, “We demonstrate our continued discipline in shipping our strong backlog only as and when needed by our end customer. So, in contrast to weak consumer electronics spending today and despite concerns of a global recession, we believe overall infrastructure spending remains strong and we continue to experience sustained demand in most of our end markets, and this is what we continue to see.”
So, I’m seeing just on the surface here, Daniel, a lot of momentum, a lot of reasons why their management team is kind of excited here for 2023. Is there anything that’s sticking out to you so far?
Daniel Snyder: So, to follow up on exactly what you just said about the backlog, so the big thing about earnings calls is they’re not giving forward guidance, right now it’s everything.
Austin Hankwitz: Correct. Yes. Let me talk about that in a little bit, but, yes.
Daniel Snyder: But the thing is — is they talk about their backlog and they also talk about how when you set up your order with Broadcom as a customer, those are non-cancelable orders, which is why I think they believe that they are such in a strength, like, they’re in the perfect position to be like once they have that contract signed, you can’t back out of it. You’re getting the delivery of the chips whether you need it or not.
Austin Hankwitz: I had no idea. And that actually makes a lot more sense now that you say that, because we’re going to talk about how they didn’t give guidance, but they’re still saying that things are going to be good next year because their backlog is completely full and, like, it’s okay. So, that’s…
Daniel Snyder: Exactly.
Austin Hankwitz: …I didn’t know that. That’s interesting. All right. So, as we dive a bit deeper into the recent earnings release, we learned a few important things. Starting with their Semiconductor Solutions Business segment. So, this segment is specifically made up of networking, broadband, server, storage, wireless and industrial revenue. Of the five different sort of components that make up this business segment, networking, specifically, saw a massive 30% bump in revenue growth. This was driven by their deployment right back to that idea of the new products that they’re deploying, right, the Tomahawk 4 for their hyperscale data center customers. Management is expecting this networking component of that business segment to grow 20% next year.
Now, I’m going to be honest, a lot of the trends that I see as it relates to this company’s fundamentals are pointing up into the right. And again, to your point, right, talking about guidance, despite management not providing 2023 guidance due to some deteriorating macroeconomic backdrop and things of that nature, they did reiterate that their order book is completely full for 2023. Very, very cool.
But my general take on the company and we’re going to talk about the VMware acquisition and valuation and things of that nature, the company’s PE ratio, in my opinion, is priced to perfection right now at 14.6 times. So, let’s actually pull up an image I think that you guys might have. I pulled it from FAST Graphs. And what it does is it overlays the company’s stock price on top of their sort of historical trend in price to earnings ratio. So, I’m going to wait for that to get…
Daniel Snyder: Yeah. Josh, you get that slide, you can throw one up. There you go.
Austin Hankwitz: Wonderful. So, as you guys can see here, the stock price is in black and this blue line is their earnings per share, right? This is their average historical what they’ve been trading at over the last several years. And if we kind of take a step back, we can see, oh, wow, their stock price, weirdly enough, has traded exactly with that. It’s a perfect historical. And as you can see right here, the stock price again in black is price to perfection, showing that it is all that value, all that whatever could happen next year is already priced in, right?
So, at $545 — I’m sorry, $544.02 a share makes me wary that might what come in 2023, like, if there’s any kind of maybe some that comes out of left field or something we didn’t expect, right, like, I mean things are priced to perfection right now. Daniel, as you look at this graph, is there anything that’s over here telling you like, I like it, I don’t like it, what’s — what specifically we’re talking to you here?
Daniel Snyder: Hey, man, when you look at it, it’s up into the right. So, what is there not to like.
Austin Hankwitz: Agree.
Daniel Snyder: It’s up into right. It looks good. And I also love that it’s underneath the blue line. Like, if you take that as almost like a mean, right, like an average over the years, I mean, look at that. Imagine if you were back in — what was that, like, $14, I think, it was a share way back in 2009.
Austin Hankwitz: Could you imagine. Oh, my gosh.
Daniel Snyder: Look at that, alpha.
Austin Hankwitz: Insane. So, let’s take down this image now and talk a little bit about the VMware potential merger. So — just so we’re on the same page, right, VMware, ticker symbol VMW. I believe actually, Daniel could probably add a little bit more color as to what that company does versus Broadcom. I got a little bit of commentary…
Daniel Snyder: Let me justjump inreal quick. So, VMware is the company — and I’ll let you finish up. I’m just going to give a brief overview.
Austin Hankwitz: Please.
Daniel Snyder: They’ve got a lot of patents as well, right? So, it’s another patent company. And this is Broadcom’s playbook, right? They are fabulous. They do not own a fab like Taiwan Semi, which is pure fab, or Intel has fabs and they design chips. So, all Broadcom does is they go out and they acquire other companies that are creating chips that they can either integrate in their portfolio or they just buy the patent and then go and sue companies like Apple or Qualcomm, whoever is trying to use it — or Samsung, sorry, like they just go, and that’s their playbook, and that’s how they generate so much revenue based off of fees of the patents.
Well, VMware has some great patents. That’s kind of like, I mean, that goes back to early 2000, I believe, even it was just like some of the most used patents that they have is from those early years which will fall off here over the next few years, but you can still capture that plus everything they’ve added on. And you’re talking about like taking data off of one computer and putting it on another computer like that protocol and that process is from a patent of VMware.
Austin Hankwitz: Got it.
Daniel Snyder: So, digital stuff.
Austin Hankwitz: Which I guess would make a lot of sense as to now why the European Commission has announced a couple of days ago that they’ve opened an in-depth investigation to assess if the transaction would allow Broadcom to restrict competition in the market for certain hardware components, which really work well with VMware’s software. Specifically, this is what was released, right?
The Commission’s preliminary competition concerns: “The Commission’s preliminary investigation” indicates that the transaction may allow Broadcom to restrict competition in the market for the supply of NICs, FC HBAs and the storage adapters by degrading interoperability between VMware’s server virtualization software and competitors’ hardware to the benefit of its own hardware, and/or foreclosing competitors’ hardware. Pretty much saying, you know, at the end of the day, monopoly vibes, not good stuff, really concerned about it. And at the end, they kind of conclude with, “This, in turn, could lead to higher prices, lower quality and less innovation for business customers, and ultimately consumers.”
Now, I don’t know much about the company. You obviously know much more about both these companies, I think, than I do. I also like, I think the idea of like massive mergers like this, right, there’s a lot to analyze, there’s a lot of scrutiny, there’s a lot of people that are involved. So, it’s hard for me to comment on what might happen.
But just to kind of wrap things up about Broadcom here for a moment, right, I’m cautiously optimistic. They’re still calling out strength across cloud, enterprise and telecommunication. They’re showing no signs of server storage weakness. Their backlog is completely booked solid. Their dividend yield is 3.4%. Free cash flow is up 25% year-over-year. They plan to spend — I’m sorry, $13 billion in share repurchases here. A lot of fundamental reasons to be excited about the company. And to your point, right, pointing up into the right. So, I’m buying weakness if we experience any, which I mean as we continue to see this acquisition unfold, we certainly might.
Daniel Snyder: Yeah. No, it’s a lot of grip. I want to go ahead and get over to the chart real quick after, like, a little pause break, right? Let’s go and check out what the price. I mean, obviously, you showed the chart. I mean, if we go back to the monthly, I think we’d see the same chart that you did. I mean, obviously the saying, yeah, back here, the low of — in 2009, it was $14.33. But let’s get more granular, like, what’s going on right now.
Well, obviously, ever since the COVID low of when the share price hit $155.67 and the entire market puked, this thing has done nothing except go up into the right. And why is that? Because everybody was home buying, computers and new phones and data centers had to be aggressively ramped up with all their spend and who controls literally everything. Like there is probably not a piece of technology on this world that operates without some sort of a Broadcom patent or chip design or whatever it might be, so one of their acquisitions, right? They legit run technology of the world, which is crazy to think about.
So, that’s why it’s like, well, who are you going to buy? You can buy Broadcom. And then you going to mention about dividend yield. We’ll get to the dividends here in a second. But so, all I did for the Fibonacci levels here is I drew from the beginning of January of last year, and of course, we’ve seen the entire market pullback.
So, the interesting thing that immediately stuck out to me about this specific stock is remember how the market puked back in June, and June was like the bottom for the year, right, of the overall market. Well, this didn’t do that, right? So, back here in June/July, it found a bottom, but its bottom is actually here in October. So, it’s kind of interesting how that works, where it’s like, oh, people really didn’t think chips were going to get hit that bad back last summer.
Obviously, as you mentioned, there’s now worries about what’s going to happen this next year if we go into recession, if you’re seeing recessionary fears, even though CEO came out on the last earnings call, CEO Hock Tan, and he said, “In contrast to weak consumer electronics spending today and despite concerns of global recessions, we believe overall infrastructure spending remains strong and we continue to experience sustained demand in most of our end markets, and this is what we continue to see in Q1,” and their Q1 actually ends at the end of January. So, keep that in mind.
So, this is like — this was their last earnings call. And I think from here people are like, oh, because we mentioned how you can’t cancel orders and everything else, this company is back to being “safe”
Now, obviously, if recession does hit and all their customers take a hit, they might see a hit going forward into the next year, which is what I think you’re seeing here, like long-term play thinking, right? So, there’s still time to figure out what’s going to happen here. But we see the bounce off the Fibonacci level, which is something that stuck out to me.
However, if you’re going into patterns and you want to talk about technical analysis patterns, if we get a pullback here and it could be even back down to this 38.2% level, right, and then we see it turn back around and come back to the 61.8%, that’s almost like a perfect inverse head and shoulders.
And if you don’t know what that pattern is, it pretty much say like imagine there’s a neckline here, okay, and then you have a shoulder here, you have the head here, and if we have another shoulder here and bounce to the right and then breaks through the neckline, it’ll probably come back, it would retest, but then the move after that — and all patterns are is psychologically the market, right? It tells you what the psychological people behind making the moves are doing.
What you do is you take the neckline, you draw it to the lowest point of the head, which is 35% here, and then you turn around and you draw that 35% the other direction, and that takes you all the way up to this extension of the Fibonacci level, which is pretty crazy, right?
Austin Hankwitz: So, you’re telling me that the technical analysis wizards out there are looking at this as an inverse head and shoulders, and the way to describe that is — well, I guess the way to predict it or trade it is to see the distance between the — I’m new to this stuff. So, is it bottom?
Daniel Snyder: It’s the neckline.
Austin Hankwitz: The neckline? Okay.
Daniel Snyder: Yeah. So, theneckline and the highest point of what’s called the head, right, so here’s the head and shoulder.
Austin Hankwitz: Got it.
Daniel Snyder: So that’s — you take that — sorry, I said 35%, it’s actually 25%. Take that 25%, you immediately inverse it from the neckline, and that should give you the implied move of where we’re headed next. And that’s strictly — it’s technical analysis…
Austin Hankwitz: So, what’s the number? What’s the number?
Daniel Snyder: So, that’s up here about $749.21 is that Fibonacci extension level that you see there, and that pretty much lines up pretty close 25% is — okay, maybe not exactly there. I was off. It’s over $700.
Austin Hankwitz: That’s sure sounds exciting.
Daniel Snyder: That’s exciting. So, that’s something I would keep in mind. Obviously, things don’t have to play out this way, but just from a technical analysis standpoint, that’s something that you could see. Now, there’s no timeframe on when that will pan out, right? Anything can happen. We’re obviously above the moving averages. It’s above its 200-day, which is favorable. The 20-day has already crossed over. The 50-day is in the upturn. The 100-day is starting to upturn. You’ve got a few gaps below the market here. But it’s an interesting chart, and on the daily timeframe. So, something to keep in mind there.
Austin Hankwitz: What does the weekly look like? Has the weekly closed above that 200-day yet or no?
Daniel Snyder: Let me go ahead and go back real quick. We’re looking at the weekly timeframe. The weekly is above all the moving averages as well. But they’re not positively stacked yet. So, until that…
Austin Hankwitz: Got it. Got it.
Daniel Snyder: …they maybe to back over the 50, that is what some Quant systems like to follow as if the moving averages are stacked, then you can buy. If they’re not, you don’t touch it, right, different kind of strategies out there. So, it’s a quick look. All right, Josh, you with us back there? If you don’t mind throwing up that next slide. We’ll keep the show going. I’ve got a couple more things about Broadcom I want to point out real quick. So, let’s just run through these. That was awesome slides, talking about the VMware.
Let go ahead and go to next slide. There we go. So, of course — oh, Avago, Broadcom, we touched on this. We can go ahead and skip that. And I want to get into this. And this is what’s surprising to me. So, one thing about Broadcom is they have their wireless chip sector, and they have one customer that makes up the entire sector of the base. So, they formed this, and they filed this form back on January 23, 2020. And at the bottom is what I want to point out.
So, what is talking about here is it entered an agreement with Apple to be its largest customer of these chips that it makes, okay? They signed a three-year agreement, and it was like $15 billion or something like that. Well, where does my mind go? My mind goes, what came out within the last three years? What was going on in this sector?
Well, of course, we got the new phones. The M1 semiconductor chip came out, the new MacBook Pros and everything. But we’re coming towards the end of that three-year mark, right? We’re at the end of 2022 right now. I am expecting there to be an eventual agreement announcement again of them reupping this deal. But I think Broadcom is going to flex pricing power on Apple and I think you’re going to see this be a driver for the stock price.
Austin Hankwitz: Daniel Snyder with the predictions. I love it. Okay. Okay.
Daniel Snyder: That’s what I’m coming. That’s what I’m coming with. So, just wanted to point that out. Obviously, they have to file it publicly. So, something to keep in mind.
Let’s just go ahead and go to the next slide. Let’s go back to the VMware, right? So, is VMware going to happen? That’s what everybody wants to know about Broadcom right now. So, of course, as you mentioned, the EU is looking into this. United States government has a look into it. It’s a worldwide ordeal, right? Like, Broadcom being the patent powerhouse that it is where it goes and buys a company, acquires it, slashes the labor and expenses, and just folds in the patents. And obviously, Broadcom, what do they do? They don’t have a fab. So, they just spent so much money on R&D. On their latest earnings, they said they spent like $4.9 billion…
Austin Hankwitz: Oh, yeah. That’s huge.
Daniel Snyder: …on R&D for the quarter, right? Like, they’re spending money like crazy. But also with the revenues, CFO, Kirsten Spears, pointed this out on the last earnings call, said free cash flow in the quarter was $4.5 billion, representing 50% of their revenue. 50% of the revenue just being free cash flow.
Austin Hankwitz: Come on, now. Come on, now.
Daniel Snyder: How crazy is that. Like, we’re talking about free cash — oh my gosh. Anyway, so, VMware patent portfolio, this is going back to 2002. Like I said, they’ve been around a long time filing patents, innovating the whole thing. What happened here in 2020 was not that they didn’t stop filing patents, is that patents take so long to get through the system, okay? So, I strongly believe that this fall off here is just the reaction of what is actually coming out that they have filed. So, I’m sure there’s some things still in the backlog there as well.
Let’s go ahead and go to the next slide, Josh. Excuse me. So, this goes back just another form of how it all fills out. There are granted the majority of their patents, which is crazy. So, there’s a lot of like people do statistics on who cares if you file patents if it never gets granted. And so, they, like, use that as like the strength of the company and how smart the engineers are and everything else. I think, the number was something like 98% of all patents filed by this company get granted, which is huge.
Austin Hankwitz: That is wild. That is absolutely insane.
Daniel Snyder: Yeah. So, next slide, Josh. And who uses all these patents? Well, the United States of America, right? So, when you talk about Broadcom, Broadcom used to be a company over in Singapore. They’re trying to play nice with the Trump administration. They moved over to the States. They now operate here. That was back also when they were trying to close the Qualcomm (QCOM) deal, which obviously got shut down, because Qualcomm probably has chips and our military equipment or whatever it might be, right? So, there is a little bit of worry there with the China stuff.
But, next slide. I think about who’s the companies within the United States of America that are using all of these patents.
Austin Hankwitz: Hmm, okay.
Daniel Snyder: And these — again, this is for VMware, right? You have IBM, 979; Microsoft (MSFT); Red Hat Inc, which spun out of IBM; you have Amazon (AMZN); Bank of New York Mellon Trust (BK); Intel; Cisco (CSCO); Hewlett-Packard; Citrix (CTXS). I mean, names that you know, right? All of these companies are paying patent fees to VMware (VMW), so what is there not to like? Of course, they want the company. I mean, that’s what they do. They just acquired patents and then they monetize them. It’s brilliant. So, let’s go ahead and look — what’s that?
Austin Hankwitz: I was going to say you did a really good job of painting that picture. I mean, I had no idea that was the case with VMware. I mean, I understood obviously patents are patents, but IBM, Red Hat, I mean, Microsoft, that is crazy.
Daniel Snyder: And not to — so, when they did the Qualcomm deal, remember, Qualcomm was the company that invented 3G. They invented 4G. Now they’re inventing 5G. They own all of those patents that are now being invented…
Austin Hankwitz: Now, I think, that’s crazy.
Daniel Snyder: Qualcomm is licensing that to Apple (AAPL) and Samsung, Google (GOOG, GOOGL) , Android, like all that stuff, not to mention all the cars that were trying to connect on the roads nowadays. Like, the patents are used everywhere. And then you have Verizon and AT&T, like, literally you’re talking about fees on fees on fees, which is a tremendous amount of revenue. And if you own the portfolio patents, which I mean, they already, like I said, they run the world on technology, I mean, you can command whatever price you want.
And so, that’s why you see — I remember it was like a year or two ago the CEO just acquired a ton of stock in, like, the $500 or something share level, like, they just sit back. And you were talk about the dividend. So, let me run through the dividends real quick. So, you mentioned the yield. The dividend yield — one second, I’m trying to find out where I am. There it is. Current yield is 3.35%. The annual payout being about $18 a share. Payout ratio only about 44.9%, and a five-year annual growth rate of 28% on your dividend.
Austin Hankwitz: That’s compounded annual growth rate.
Daniel Snyder: Compounded annual, yeah, the CAGR. Exactly. I mean, incredible though. The dividends there, they have like the steady stream of revenue. They have — Apple is like one of their biggest customers, not to mention everybody else in the world, because they operate in all territories. So, absolutely wild. It’s absolutely wild.
Josh, why don’t we run through the Rating Summary and the Factor Grades for everybody real quick, as well as the Dividend Grades from Seeking Alpha, because we always take a look at those. Seeking Alpha Authors have a Buy on the stock; Wall Street analysts are a Buy; and the Quant System is a Hold at this moment in time. The Factor Grades are: a C for valuation; a D+ for growth; A+ for profitability; B+ for momentum; and C+ for revisions.
Now look at that profitability real quick. A+ across the board, three months ago, six months ago. I mean, the company is just profitable, as we know. Like you heard, 50% of revenue is free cash flow. I mean, come on. All right.
So, let’s look at that Dividend Grade real quick as well from Seeking Alpha. Obviously, dividend safety is a B-; dividend growth is an A+; dividend yield is an A; and dividend consistency is a B+. And there, of course as well, is where you can see last announced dividend $4.60; dividend growth for 11-year straight; five-year growth rate, 28%; everything else that we mentioned as well. So…
Austin Hankwitz: Now, I got a quick question before we jump, and I don’t know the answer to this, and I don’t know if you do either. But the dividend growth rate there for 11 years, I’m curious, like have they ever not paid a dividend included or I mean what I’m saying is, is this just a company who — I mean, I think we saw back in the around that $14 a share in 2009, like, is — has they’ve been paying and growing their dividend since forever?
Daniel Snyder: Well, it goes back to — let me go back and make sure I get the exact date right. I remember we did the history thing at the beginning of the episode, right? So, it was — Broadcom was founded in 1991 by the Henrys, as I mentioned. Obviously, I don’t think they really kicked it into gear. I think it was 1995. One of the Henrys actually became full-time and then they started from there. They’re actually out of Los Angeles, funny enough. They had a condo on the west side of the city. They’re not Silicon Valley, which I think is pretty cool.
What year was it? So, 2015, Avago bought Broadcom. May — so I don’t see. 2009 is when Avago Technologies went public on the NASDAQ. I’m not sure about — so — before 2015, it does show that they paid out a dividend. On the consistency, I’m going back here to the dividend history. Be right back in one second. In a 10-year and the max. So, 2011, we get 10 years of data a little bit more here. 2010, they did pay out a dividend $0.07 back then, but that’s also when the share price was $14…
Austin Hankwitz: $14.
Daniel Snyder: $14, yes.
Austin Hankwitz: So, no real risk here to see a company pay a big dividend, something we saw with Disney (DIS) or airlines and things of that nature. I mean, this is a company who’s paying a dividend very regularly and has every intention to continue doing so.
Daniel Snyder: Yeah. And Jacob did point out UCLA professors. And actually, one of the Henrys was the UCLA student that then got invited to be like the Doctorate or something. I mean, both of them are very interconnected with UCLA. I did read a little bit about that. Henry asks any regulatory risk for patent monopoly?
Potentially – Henry, you got to remember patents fall off over, I think, it’s 20 years. So, they have 20 years to monetize as much as they can. You’ll see this a lot in the drug world as well. When you talk about prescriptions and everything else, when you look at the big pharmaceutical companies, they have to continue to buy new patents. And that’s what Broadcom is trying to do here, I think.
As I mentioned, VMware has their early-on patents. They’re going to fall off here within the next few years from the early 2000s. Some maybe already are. And those will become public domain. But I think you’ve got to remember like you’re building on top of those patents. So, I think it’s more about just like how do we get the smartest engineers to work for us? Well, we just acquire their companies.
Austin Hankwitz: Yeah. Yeah.
Daniel Snyder: Any questions from anybody? I hope you enjoyed the episode. I mean, there’s a lot to go into with Broadcom, VMware. Can I ask you, Austin, I mean, if you had to take your gut, your gut instinct, is the VMware acquisition with Broadcom going to go through?
Austin Hankwitz: I’m going to say yes, just because I feel like that Broadcom has done a such a good job of proving to regulators, I’m sure in the past. Obviously, Qualcomm, it’s a different story, but proven to regulators in the past that they deserve to do these specific things. It does not break any antitrust, yadda, yadda, yadda, I think it will go through.
Daniel Snyder: And I’m “inverse.” Boom.
Austin Hankwitz: Okay.
Daniel Snyder: I’m going to say, I don’t think that this one makes it through. With the overall government regulatory environment that we’re in right now, with how much they already control, with how much VMware has that is crucial due to certain technology, I mean, I only skimmed the very, very 0.000001% of their patents when I was looking at it. Like, it’s endless. And it’s like the biggest thing countries are thinking about right now is what patents are used within military missiles and everything else. That is where the world’s at right now.
And I don’t think — I mean, the deadline for the EU thing was actually yesterday. And when that news press came — or that news — press release came out saying, “Hey, we’re going to dig deeper in this.” They’re like, we really need to make sure with everything going on that. This is kosher, because Broadcom still has a lot of ties to China. And the whole thing buying Qualcomm is, well, if Broadcom buys Qualcomm, well, China then — what’s that company, Hawaii? Huawei?
Austin Hankwitz: Huawei.
Daniel Snyder: Huawei. They’re like, are they — we’re going to control 5G of the world? And that’s where like America was like, absolutely not. So, I think they’re doing a lot of detailed and deep analysis into these acquisitions. And with this one being that large for that price tag and everything else, I’m not sure it’s going to go through, but we’ll see.
Austin Hankwitz: We will see. The time will tell.
Daniel Snyder: We’ll circle back.
Austin Hankwitz: The time will tell.
Daniel Snyder: We’ll circle back.
Austin Hankwitz: Happy, happy holidays.
Daniel Snyder: Happy holidays. Merry Christmas, Happy Hanukkah, whatever you guys are celebrating. Obviously, hope you guys like the episode. If you have stock ideas for the future, like I said, this one was pitched by John in the chat, obviously, you can e-mail us as well, investingexperts@seekingalpha.com. You can find me over on LinkedIn. And you can find Austin on Seeking Alpha Cash Flow Freaks. He puts out amazing content.
Austin Hankwitz: Articles every week…
Daniel Snyder: Obviously,I polled the Nike, you talked about the retail investors. I mean, a lot of good stuff there. Obviously, he’s on Twitter and TikTok as well. And everybody, we hope you have a great rest of the week. Enjoy the holidays. Stay warm out there. Have a little hot chocolate, maybe spike it if you’re into that.
Austin Hankwitz: Little apple cider action, who knows?
Daniel Snyder: You know your stuff. Yeah, enjoy yourself. So, all right, guys, we’re going to get on out of here. Vita [ph], it’s good to see you as well. You’re here every week. We love that, and all the rest of you that are here joining and hanging out with us.
Josh, let’s get on out of here. Everybody have a great rest of the week. Investing Experts Podcast. Broadcom. Goodbye.
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