Broadcom buys chipmaker Netlogic

Broadcom is planning to write a cheque for $3.7 billion to buy chipmaker Netlogic.

Its cunning plan is to take advantage of a sudden demand for networking gear that delivers video and Web access to mobile devices.

Huawei and ZTE use Netlogic processors in the equipment that controls the flow of video and other data across the Internet. With Netlogic in its paws, Broadcom, which also makes chips for mobile handsets, has a lot more control of that market.

NetLogic did better than Broadcom last year raking in a gross margin of 55 percent last year, topping Broadcom’s 52 percent. Broadcom shares have lost 24 percent of their value this year.

It is expected that it will take until the middle of next year to close the deal.

Broadcom said the acquisition will boost its 2012 earnings.

Broadcom makes chips for Samsung and Nokia Oyj mobile phones, and will now be in a position to double its market in network equipment.

Chief Executive Officer Scott McGregor told Bloomberg that it has increased sales for at least eight consecutive years as soaring internet traffic boosted demand for wireless-network equipment.

Broadcom will flog NetLogic’s chips alongside with its own products. The deal is the fourth-largest acquisition of a U.S. chipmaker in the past five years, and the second-largest this year after Texas Instruments bought National Semiconductor for about $6.5 billion in April.