Based on what Broadcom did with Brocade, unless you're a developer in MF, consider yourself gone or divested to some acquiring company. https://www.theregister.co.uk/2017/08/03/brocade_packet_core_sold_to_mavenir/
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Funny thing about CA. We are so top heavy that if we need to dump 7k people I bet 5-6k are Manager or higher.
@VtlVp4F-1plf looks spot-on to me, if perhaps a bit conservative. Public documents (SEC filings) on the Broadcom investor page are very clear that they are aiming at a 55 gross margin. That's a bit higher than current Broadcom margin and MUCH higher than CA's. Basic arithmetic says that 7k-8k current CA employees go away. Non-viable CA products are end-of-lifed or sold immediately. Most viable CA products get dramatic expense reductions and KTLO'd (keep the lights on) as long as cash can be squeezed out of them. As much as possible, use CA assets and revenue to purchase CA mainframe business.
“There is no reason why the Broadcom should shut down half (or more) of the company immediately.”
Oh yes there is.
CA generated around $1.2B free cash flow last year, and Broadcom is paying nearly $19B for CA, all through debt issuance.
Assuming all other things remain equal including revenue, Broadcom will need to cut CA costs around 20% just to service the interest on the debt, meaning it is not accretive to earnings. That’s not AVGO’s style.
Cutting costs 40% is a start, but the likely scenario is -
Cutting SG&A by 80-90% immediately, maybe as low as 70% day one but ramping up
Divesting all CA businesses with less than a 20% gross profit margin as fast as possible
Getting all other non-MF business to 20%+ margin within 90 days to then either keep or divest
Reduce mainframe costs 30%
If Broadcom paid for CA with cash it would be different, they could take a wait and see attitude, but they took out a heck of a bank loan. The clock starts ticking Nov 5th.
All valid comments. I do tend to think Broadcom will move fast with divestures since they took on 18 billion in debt and will sell off CA assets to accelerate debt pay off.
If we're talking about future let’s say 5 years ahead of us... It’s very likely that mainframe will be last survivor from CA.
There is no reason why the Broadcom should shut down half (or more) of the company immediately. The will fire people in supporting function and middle to top management – because they don’t produce any significant value (their work can be easily outsource to Wipro or Accenture or covered directly from Broadcom) and then fire sale will begin.
I seriously feel this could go down as one of the biggest blunders in American business. Like aol Time Warner
Yes, some of these speculations are hilariously asinine. CA is not a chip company. While I don't doubt they will make cuts, these 80-90% numbers are a joke. From what I've heard Broadcom is even struggling in places you would assume there is overlap, such as accounting and legal contracts. Running a software companies with thousands of customers is a lot different selling chips to a hand full of hardware manufactures.
Remind me... is Brocade a software company?