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Axe Falls at BroadcomAxe Falls at Broadcom

Former acquisitions - BlueSteel, NewPort, Silicon Spice - said to be among those hit by 20 percent staff cut

November 22, 2002

3 Min Read
Axe Falls at Broadcom

The reckoning has come to Broadcom Corp. (Nasdaq: BRCM), as an estimated 20 percent of the staff were laid off this week, according to sources.

The layoffs are part of a restructuring outlined in October, when CEO Henry Nicholas III said Broadcom planned to lower operational expenses by 10 to 12 percent, striving for a break-even point of less than $300 million in quarterly revenues (see Broadcom Reports Q3).

Industry analyst Linley Gwennap and another source both estimated the total layoff at 500 people, or 20 percent of the roughly 2,500 employed at Broadcom. Accounts vary as to the date of the layoffs, but it appears Broadcom made all the cuts this week.

Cuts were across the board, but higher-end projects were hit particularly hard, according to Gwennap, president of consulting firm The Linley Group. In his most recent network processor newsletter, published Thursday evening, Gwennap wrote that Broadcom's Silicon Spice Inc., NewPort Communications Inc., and BlueSteel Networks Inc. acquisitions have been "almost completely wiped out."

Other sources have been more generous. One said NewPort lost about 60 percent of its force -- leaving 30 engineers, down from 75 -- and another said BlueSteel was cut by two-thirds.

Broadcom officials would not confirm the BlueSteel layoffs when contacted Thursday, and they were not immediately available at press time to comment on the overall 20 percent figure.

A spokesman told Light Reading that the company's restructuring is expected to last through December, making it premature to discuss any specific cutbacks. Moreover, he said, Broadcom doesn't expect to identify which divisions were most affected by the restructuring.

Like many other firms, Broadcom is suffering from the spate of communications-related acquisitions that it made while the market was soaring. Similar troubles dogged PMC-Sierra Inc. (Nasdaq: PMCS) last year and Vitesse Semiconductor Corp. (Nasdaq: VTSS) this year, and both ended up shedding some of the startups acquired in 1999 and 2000 (see PMC-Sierra Pulls Packet Silicon and Vitesse Drops Some Packets).

If reports are accurate, Broadcom is taking the same road as PMC and Vitesse, cutting the higher-end projects that were aimed at the carrier space but acquired at a time when that market was thrilling in a more positive sense.

NewPort was Broadcom's ticket into OC192 networking, as the startup bragged it could run 10-Gbit/s electronics on chips made in conventional silicon (see Broadcom Buys Its Way In). At the time, such speeds could only be achieved by more exotic, more expensive materials such as gallium arsenide (GaAs) or silicon germanium (SiGe).

NewPort was slow to produce production-worthy OC192 products, however. Meanwhile, other vendors have since claimed to reach 10-Gbit/s in CMOS (complementary metal-oxide semiconductor) processes, the latest being startup Aèluros Inc. (see Aeluros Aims at High-Speed CMOS).

Silicon Spice was developing a chip that consisted of several reconfigurable DSPs (digital signal processors). Such a chip might be useful in areas such as voice-over-IP, where DSPs would be needed to crank algorithms for processing voice signals (see Broadcom to Acquire Silicon Spice).

NewPort and Silicon Spice were chasing markets that have since cooled, but BlueSteel doesn't fit that mold. This was Broadcom's security play, acquired in March 2000, and it was "one of Broadcom's more successful acquisitions," Gwennap wrote. "The company may move more quickly toward integrating security into its other products rather than producing standalone security chips." If so, this could be part of an emerging trend (see Intel Moves on Security).

Several co-processor startups would hope to fill the void if Broadcom stopped developing discrete security chips. Candidates would include Cavium Networks, Corrent Corp., and Hifn Inc. (Nasdaq: HIFN) (see Gigabit Security's in the Chips).— Craig Matsumoto, Senior Editor, Light Reading

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