Investors Should be Cautious on Proposed Avago IPO

Implications: 1. Since being spun out of Agilent the management has been focused on an IPO that would pay off the investors. 2. Avago has sold off business's such as storeage IC's, printer ASIC's, and Infrared components to help pay back initial private equity investors.  They have done a good job of cutting cost to make themselves look more profitable, but at the expense of mortgaging a large part of their future. 3. The profitable led business is now almost completely outsourced and they have lost significant marketshare to competitors as a result of a lack of significant new products in the lighting area.

Analysis: 1. Avago has reduced costs to make it be more profitable.  However, this has been done by hollowing out the organization.

2. Investors interestor in this IPO should ask the following questions.

A. What is the state of the long term R&D program, and what has been the turnover of key engineers.

B. What is the status of the original Agilent sales /marketing organization since the majority of those people have been let go.

C. What is the level of employee moreale under the leadership of Hok Tan.  How many lawsuits have there been by employees as a result of his behavior, and what is the status of these lawsutis.