60 Business The Economist May 28th 2022
And much that accounts for Switzer
land’s corporate strength is in question.
The war in Ukraine makes some Swiss pon
der the country’s neutral status; to wide
spread surprise, their government has
joined Western sanctions against Russia.
In the past, any tinkering with neutrality
was considered a betrayal of the nation,
says André Hoffmann, vicechairman of
Roche. Moreover, the country is still deal
ing with the rehabilitation of its wealth
management industry, which has been
forced to clean up its act over the past 15
years after America declared war on Swiss
banks that had helped its citizens dodge
billions of dollars in tax. According to MrBreiding, wealth management remains
under threat from lower investment re
turns and increasing international pres
sure for financial transparency. The
pharmaceutical sector is grappling with
the rapid rise in costs for drug innovation.
Yet the Swiss have shown in the past
that they can overcome challenges with
hard work and ingenuity. Swiss watchmak
ing seemed to be winding down the path to
extinction until Swatch revived the indus
try by making cheap watches more fun and
expensive ones more desirable. Chances
are that thegreatand good of Davos will
feel right athomein Switzerland for many
years to come.nT
he annualmeetingoftheWorld
Economic Forum (wef) is a study in
contrasts: business and politics, East and
West, north and south, a few insiders
cloistered in wintry Davos and the bil
lions of outsiders on whose fate they
pontificate. This time around, as thou
sands of the world’s movers and shakers
belatedly descended on the Swiss ski
resort between May 22nd and 26th, the
big disparity was between the gloom
about the state of the world and the joy of
shoulderrubbing in person (minus the
snow) after a twoyear pandemic hiatus.
The macro mood was sombre for good
reason. High inflation doesn’t feature in
the Bible but other than that the list of
ceos’ top concerns currently reads like
the Book of Revelation: war (in Ukraine),
pestilence (particularly China’s destruc
tive effort to stamp out covid19 at
home), famine (everywhere, if war and
pestilence aren’t staved off ). On top of
that, one Western boss after another got
an earful from their emergingmarket
counterparts about the global knockon
effects of the Americanled sanctions
against Russia on food and fuel prices.
This apocalyptic backdrop helps
explain why companies reined in the
pizzazz. JPMorgan Chase, an American
bank, cancelled its hotticket party. The
one thrown by Salesforce, a business
software giant, was as raucous as ever
but some other corporate dos looked
virtually empty. The boss of one giant
firm noted the lack of “vibrancy”.
Attendance seemed down on previous
years—by half or so, chief executives
reckoned. Several American regulars
were kept away by prior engagements
(Amazon, BlackRock, ExxonMobil and
Meta all hosted their annual shareholdermeetingsthisweek).Russianswere
uninvited; Russia House became Russia
War Crimes House, displaying images of
atrocities committed by Vladimir Putin’s
troops. The absence of China, whose
representation fell from hundreds to a
handful owing to President Xi Jinping’s
zerocovid policy, made the talking shop
less global—and less useful—than usual.
But not useless. This year’s worthy
panel discussions will not fix global
isation, avert climate catastrophe or
foster inclusive growth. At the same
time, in no small part because things
were less hectic, attendees reported
enjoying the frank backroom chats that
are the wef’s main draw more than ever.
Individually, these are about corporate
selfinterest. Collectively, they can add
up to something meaningful. Davos
needs the world more than the world
needs Davos. That isn’t to say there are
no mutual benefits.TheWorldEconomicForumPostcard from a world on edge
DAVOS
For all its flaws the plutocrats’ talking shop has its usesWe mustn’t stop meeting like thisTechnologyBroader still
A
market downturnis a good time for
buyers. Look at the tech industry. The
Nasdaq, a techheavy index, has fallen by
30% from its peak in November and a flur
ry of deals are under way. Microsoft is
working on the $69bn purchase of Activi
sion Blizzard, a videogame maker. Since
March, Thoma Bravo, a privateequity firm,
has spent $18bn on two enterprisesoft
ware firms. Elon Musk is—perhaps—about
to purchase Twitter, a social network.
The latest big tieup looks unusual. On
May 22nd Bloomberg reported that Broad
com, predominantly a semiconductor
maker, worth $214bn, is planning to buy
vmware, an enterprisesoftware firm. If the
deal goes through, it could be worth
$60bn. A chipmaker buying a software
firm may seem strange. But Broadcom has
done the same thing in the past with strik
ing success. Can it repeat the trick?
Broadcom is an odd beast. It started life
as Avago Technologies, a chipmaker based
in Singapore. That firm bought a number of
other chipmakers, including Broadcom,
from which it took its name. In 2018 it tried
to buy Qualcomm, a rival semiconductor
firm, for $130bn. That would have been the
biggest tech acquisition of all time. Donald
Trump, then America’s president, eventu
ally quashed the deal on nationalsecurity
grounds because Broadcom was a foreign
firm (even though it was in the process of
moving its headquarters to America).
After that, Broadcom changed tack. Lat
er in 2018 it surprised the industry by buy
ing caTechnologies, a software firm, for
$19bn. The following year it snapped up Sy
mantec, a cybersecurity outfit, for $11bn.
The motivation was not to link its semi
conductors to its new acquisitions, but to
run the software firms more profitably.
Costcutting at both firms hurt future
growth prospects but helped profits. Oper
ating margins at Broadcom’s software un
its ballooned from about 30% before the
takeovers to around 70% today.
This privateequitystyle approach has
transformed Broadcom into a tech con
glomerate. Today 26% of its revenue comes
from software. With vmware that figure
could grow to 45%. The shift into software
has also boosted Broadcom’s overall oper
ating margins, which have grown from 15%
in 2016 to 32% today, among the best in the
semiconductor industry. Investors seem
pleased. Broadcom’s share price has nearly
doubled over the past two years, comparedS AN FRANCISCO
Will a chipmaking giant’s $60bn bet on
software pay off?