Honestly, his model is simple, anyone with access to capital can do it (and there are many with a ton of capital). So, what's his secret sauce, I just cannot see it?
19 replies (most recent on top)
This is a good thread with opinions all over the spectrum, this is why I love this site. I hate threads where everyone whines or everyone is too cheerful. This one is perfect.
With interest rates rising Hock's model is failing. He was just doing leveraged buyouts with layoffs, and price increases to captive customers. Milking the renewal revenue flow. It's a business model that is decades old. He isn't so successful either. He's had two acquisition failures and this will be the third.
You’re clearly speaking out your behind. Is that why he grew his market cap by 5x after acquiring Broadcom from 70 billion in 2016 to 350 billion now. His financial model is rock solid because he knows what technology to specifically acquire and what technology to cut out. He knows how to increase margins on successful product lines and make customers pay for technology they know they can’t run their business without. He puts his foot on customers necks where he can and leverages his technology over them. Hock knows wtf he’s doing.
Yep, access to cheap money made Hock successful. Do any of you think that you might be a successful business mogul if you had access to $billions for cheap?
ZIRP
With interest rates rising Hock's model is failing. He was just doing leveraged buyouts with layoffs, and price increases to captive customers. Milking the renewal revenue flow. It's a business model that is decades old. He isn't so successful either. He's had two acquisition failures and this will be the third.
- Finding the 20% from the 80%.
- Give them the liberty to operate nimbly as internal startups without the layers.
- Delight customers that stay.
- Ignore the competition.
- Take their business.
- Repeat.
Hock Tan is a trained engineer, with some accounting skills.
He knows how to acquire other companies, cut their operating costs, extract profit, and then repeat the process again.
Broadcom is essentially a private equity firm. They create NO NEW VALUE.
Hock is the best. Those who get stays or transitional to stays will learn hock is the man. 🏒
Singapore has become a money laundering hub. Competing with Mauritius and Cayman Islands. No one knows the origin of the money.
Probably CCP dollars recycled. ROI not important. Xi is cracking down on old CCP operations. Threat to his power.
He uses a lot of leverage. The combined debt post VMW is looking like 40bill (existing AVGO) plus 9 bill coming from VMW balance sheet plus 28 bill borrowed to purchase.
Works well when money is cheap. They have done a good job managing the debt stack so far, effectively borrowing when rates were low.
He also grows the share count ongoing. Tons of RSU plus share issuance for purchases. He is lucky atm as AVGO is trading around 10x revenue (pre VMW). The stock is a useful currency at this price. Avgo pays a very low tax rate. None the less, the new entity will be under some financial stress which will require reworking.
- Find established technologies that are past their prime with large install user bases that can't easily move.
- Acquire said companies.
- Cut employee head count and any other superfluous expenses that aren't directly accretive to the bottom line.
- Continually raise prices on user base while culling employee head count to the absolute minimum. Keep costs as low as possible.
- Continually grow earnings per share so that Wall Street is happy and the stock goes up.
- Keep developer employees loyal to the company by providing a large part of compensation in stock (i.e. "golden handcuffs") with long vesting periods. Keep compensation competitive, but not overly competitive, so people don't leave.
- Rinse and repeat
It has not happened unfortunately. I know your excited about it hock but its not going to happen for you I'm afraid. China has not and will not approve..
I would not describe 40bn in debt and two failed acquisition's successful. Are you having a laugh. Con artist maybe.
The acquisition from which you came has yet to become profitable.
His background in investment banking combined with his autism means that he can makes ruthless decisions that increase operating margins and grow revenue without the burden of considering human factors or decency. He is a shareholder’s dream and a employee’s and customer’s worst nightmare.
EBITDA; 80/20 rule
I would not describe 40bn in debt and two failed acquisition's successful. Are you having a laugh. Con artist maybe.
Hock's approach seems to be very simple. Create value for customers and cater to their needs. Continue to innovate during dips in the market adoption and lead through anticipating obvious needs of the customers. Be the best of the best of the best through talent acquisition mechanisms around the world. Pay your employees royally and enable them to achieve the fruits of their labor. This is what Hock Tan has said in many different interviews.
Colluding with China and selling them sanctioned chips and handing over sensktjve technologies