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Big Day at Broadcom

Light Reading
News Analysis
Light Reading

Henry Nicholas is going out on a high note -- he stepped down as CEO of Broadcom Corp. (Nasdaq: BRCM) today, while simultaneously declaring that the company expects to report "pro forma profitability" this quarter (see Broadcom Reports Q4 and Broadcom CEO Resigns).

The change of hands comes as Broadcom reports its sixth consecutive quarter of growing revenues, despite the pummeling that's hit the communications-chip sector.

Nicholas' departure could mark a dramatic turning point for Broadcom. Not only did Nicholas found the company with CTO Henry Samueli, but his cocky personality has been a hallmark of Broadcom's public image. Put it this way: He's the kind of guy who'd be rumored to buy a baseball and hockey team (see our recent interview: Henry Samueli, Broadcom Corp.).

Broadcom didn't specify why Nicholas is stepping down now. In Broadcom's press release he's quoted saying he's taking "much needed time off to deal with serious family matters." He plans to serve the remainder of his term as Broadcom's co-chairman, but won't seek re-election when his term expires in May.

Characteristically, Nicholas spiced Broadcom's earnings conference call with a dash of bravado: "We can successfully say we navigated the worst downturn in history," he said, before pronouncing that Broadcom could reach pro-forma profitability this quarter. (Note: That's not the same as profitability under generally accepted accounting principles -- GAAP -- which tend to be stricter.)

Broadcom will be in experienced hands, with Alan E. "Lanny" Ross taking over as interim CEO. Ross, a Broadcom board member, joined the company as interim chief operating officer in November (see Broadcom Names Interim COO).

Meanwhile, for its fourth quarter, Broadcom reported revenues of $296 million, compared with $227 million for the same quarter a year ago. The company posted losses of $1.8 billion, compared with losses of $183 million for last year's fourth quarter. Broadcom's losses last quarter included a $1.2 billion write-down of goodwill, due in part to the sinking value of acquired companies.

Broadcom also has completed its previously announced restructuring, which included layoffs of 487 to bring headcount to 2,580 (see Axe Falls at Broadcom). Also, as of today, the company's been reorganized into the following business units: client/server networking; network infrastructure, switching and security; and broadband communications.

New CEO Ross took his turn at the mike during the conference call, tantalizing the audience with some of Broadcom's upcoming products -- the fruits of spending 45 percent of revenues on R&D for the past several years, he said. One particularly cool item: a TV on a chip, with features such as Gigabit-speed switching, optical transceiver interfaces, and wireless data capabilities.

— Craig Matsumoto, Senior Editor, Light Reading

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User Rank: Light Beer
12/5/2012 | 12:47:53 AM
re: Big Day at Broadcom
The big problem at Broadcom is that it has too many products with very small markets. Also, it is surprising that a company as old as Broadcom would spend 47% of its income on R&D. It has to spend such a high percentage of its income because of multitude of products. Furthermore, its facilities are so dispersed that it could lead to bankrupcy very easily.

It has acquired so many companies and it would to hard to justify their acquisitions. I t is not clear why it acquired Spice.
User Rank: Light Beer
12/5/2012 | 12:47:22 AM
re: Big Day at Broadcom
While there are(were) some bright engineers at Broadcom, it's success(and excess) is mostly due to luck - Nothing beats being at the right-place/right-time. The Henrys rode the dot-com bubble to hyped up the share price by making a few dozen high profile acquisitions that are mostly worthless today(witness the billions of dollars of goodwill write downs), and enriched themselves royally. However, one must credit them for their maniacal vision, bravado, and shrewd salesmanship. The stock was trash talked to the strastosphere that even lowly engineers with a few thousand shares could make a fast buck if they're smart enough to unload before the bubble burst. For a while, everyone was happy.

Well, the party is over. The early executive team and those smart ones who unloaded their options before the crash have been taking LOA or retiring in droves to the Sunset and Florida mansions. Who needs to put up with hostile and brutal work environment, and give up your family and children when you have millions in the bank? Newer employees who took major pay cuts for the privilage of joining the Broadcom Club are left holding the bag with tens of thousands of worthless options. It's not surprising to see St. Nick bailing out of the sinking ship before the real dirt gets out.

The new management team & VPs are refugees from old time dinosaurs like Lucent/Agere and Rockwell/Conexant. They are 2nd rate big company number crunchers, politicians, and administrators. They're brought in to clean house and chop heads, not to lead and inspire. They'll cut it to the bone and drive it to the ground. The numbers may look good in the short run, but the visionary flame is gone. The parking lots are clearing out sooner, and fewer offices are burning the midnight oil. The slaves are Free at Last ! Broadcom & the share holders are left with a cracked shell, and all that glitters sure ain't gold.
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