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Broadcom Passes on 40-Gig

Craig Matsumoto

4:15 PM -- Is anyone else wondering why someone like Broadcom Corp. (Nasdaq: BRCM) didn't acquire Sierra Monolithics Inc. ?

It seems like such a nice target. SMI has a near stranglehold on a small but important market: serializer/deserializer (SerDes) chipsets for 40-Gbit/s transmission. And yes, it's working on 100 Gbit/s, too. (See Sierra Strikes Forth for 100G.)

"I would estimate they control 75 or 80 percent of the PHY business. If you're doing 40 Gbit/s or 100 Gbit/s right now, you're almost definitely using their stuff," says analyst Andrew Schmitt of Infonetics Research Inc.

So, why did it sell for just $180 million, to a company that's not really in the communications market? Semtech Corp. (Nasdaq: SMTC), which announced the deal Nov. 19, sells some timing chips that can apply to Ethernet backhaul, and that's about it. Otherwise, the company focuses more on areas like power management. (See Semtech to Buy Sierra Monolithics .)

A quick ping to Broadcom didn't yield a response, but I'll swing a guess. SMI reports that its revenues in 2009 will be around $50 million. That's quite good for a privately held company that's had to survive the telecom drought. But to Broadcom, it's barely a soda budget.

Maybe Broadcom thinks the money is better spent on own SerDes (plural). I'd be surprised if Broadcom can't be ready by the time 100-Gbit/s volumes start to ramp.

— Craig Matsumoto, West Coast Editor, Light Reading

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12/5/2012 | 3:51:56 PM
re: Broadcom Passes on 40-Gig

...maybe Broadcom knew SMI's track record. Just ask some of SMI's 40G and 100G customers how well their chips have worked out over the years and you'll understand why there wasn't a bidding war. Rather than be shocked at the low valuation, those close to SMI ought to be shocked at how *high* it was considering the dental state of this horse.


Other reasons folks like Broadcom might not buy would include non-CMOS process (SMI uses SiGe) and small-potatoes volume compared to most ASSPs.



12/5/2012 | 3:51:55 PM
re: Broadcom Passes on 40-Gig

I would estimate they control 75 or 80 percent of the PHY business.

What % is it once you include the in-house PHYs? (ie, the PHYs that are never sold on the open market because they are viewed as competitive advantage.)

12/5/2012 | 3:51:50 PM
re: Broadcom Passes on 40-Gig
It's probably still 75-80% and for the 40G VSR modules closer tp 95%. Only competitor to SMI is CoreOptics (chips & modules).

For DWDM the picture is changing, ODB and DPSK apps use SMI but for Coherent apps, like Nortel, they use own ASICs.

If the 40G market goes 4x10G (e.g. 40GBase-LR4 on client and CQPSK on DWDM) then their 40G biz capped.
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