Broadcom Builds on Sandburst
Light Reading first reported the deal in December with a possible price tag of $120 million. Broadcom's offer includes $75 million in cash and up to 100,000 shares of Broadcom stock; it's expected to close by March 31. (See Broadcom May Scoop Sandburst.)
Broadcom shares were up 87 cents (1.4%) at $57.19 mid-afternoon.
Broadcom picks up a passel of packet-processing chips: a network processor, switch fabric, and a traffic manager. The chips, aimed at 10-Gbit/s networks, fit on various line cards inside a switch or router.
Broadcom owns a kind of network processor via the acquisition of SiByte, and it's already got some Ethernet switching chips aimed at the metro. (See Broadcom's on a Buying Spree and Broadcom Tackles Carrier Ethernet.) But Sandburst's chips give Broadcom -- better known for serving enterprise markets -- some high-end punch for going after telecom business, particularly as broadband access continues to heat up.
"By providing and managing carrier-class Ethernet access in the metro network, Broadcom is positioning itself to more fully participate in the delivery of triple-play," writes Heavy Reading senior analyst Rhondalee Rohleder in an email.
Sandburst also gives Broadcom a "white box" program called Metrobox. Sandburst has been teaming up with Taiwanese ODMs such as Accton Technology Corp. to produce ready-made telecom systems, the latest targeting metro Ethernet. Broadcom rival Marvell Technology Group Ltd. (Nasdaq: MRVL) had begun a similar program, but using Ethernet chips inside of enterprise boxes. (See Sandburst Intros Metrobox-AS, Sandburst Boosts Low-End Metro, and Marvell's Ethernet Switch Kit.)
Broadcom doesn't expect Metrobox to revolutionize anything right away, though. "The cookie-cutter approach to metro Ethernet switches is still a little bit of time away," says Martin Lund, vice president and general manager of Broadcom's networking and switching business unit.
Sources have told Light Reading that the deal was triggered by a failed Broadcom project with Sandburst competitor EZchip Technologies Ltd. (Nasdaq: EZCH) to target a potential win with Juniper Networks Inc. (NYSE: JNPR). Lund declined to comment on the matter, saying only that Broadcom does do business with Juniper -- he wouldn't specify what kind -- and that Broadcom's working with EZchip isn't all that special.
"We also worked with Sandburst, FastChip, and Xelerated Inc. . We're fairly liberal when it comes to working with people," Lund says. "I am sure somewhere in the world there is a product that uses both EZchip and Broadcom."
Broadcom might continue to work with other network processor vendors. Sandburst itself had to collaborate with its competitors sometimes, such as cases when a customer wanted to reuse software written for another company's chips, says Vince Graziani, Sandburst's CEO.
Sandburst had raised $72 million, including a $15 million round about a year ago. (See Sandburst Secures $15M.) Assuming the deal goes through, the company's 57 employees would be joining Broadcom, with the bulk of them remaining in Andover, Mass.. Graziani would stay with Broadcom, although his role there has not been determined.
— Craig Matsumoto, Senior Editor, Light Reading