Broadcom Corp. (Nasdaq: BRCM) bought a shortcut to 10-Gbit/s Ethernet silicon today when it acquired startup Siliquent Technologies Ltd. for cash and stock.

As part of the deal, Broadcom will assume all of Siliquent’s unvested employee stock options, which will entitle the holders to receive up to approximately 200,000 shares of Broadcom stock upon vesting. That could bring the total value of the deal from $76 million in cash and stock to $83.7 million, based on Broadcom’s stock price of $38.39 at Monday’s close.

Siliquent brings Broadcom something vital it's been missing: 10-Gbit/s Ethernet technology for its Converged Network Interface Cards (C-NICs). (See Broadcom Struts Storage Stuff and Broadcom Broadens Storage Play.) Siliquent has been sampling 10-Gbit/s Ethernet NICs to server OEMs for a year, but had no design wins (see Siliquent Segues (Sibilantly) to 10-Gig).

In contrast, Broadcom’s C-NICS combine TCP/IP offload, iSCSI, and RDMA capabilities on a single chip, but those chips have been chugging along at 1 Gbit/s and 2.5 Gbit/s while Siliquent and other startups beat Broadcom to market with 10-Gbit/s processors.

It's not that Broadcom's been ignoring 10-gig. “We’ve been in development in 10-gig Ethernet for some time,” says Greg Young, VP of Broadcom’s high-speed controller business. “This brings us great acceleration in development and delivery of 10-gig speeds.”

Broadcom is likely to have an easier time scoring design wins than startup Siliquent had. Broadcom has several OEM deals for its C-NIC cards, including one with Hewlett-Packard Co. (NYSE: HPQ).

Analyst Bob Wheeler of the The Linley Group says he expects Broadcom to score 10-Gbit/s Ethernet server design wins by the end of this year, thanks to the acquisition. "This gives them a chip that's already done and ready to go sell today," he says.

Broadcom's Young thinks blade servers will be the first high-volume market for 10-Gbit/s Ethernet NICs. Blade servers use low-cost serializer/deserializer (SerDes) technology, a Broadcom specialty, rather than expensive and power-intensive optical transceivers and fiber optic cables to connect 10-Gbit/s Ethernet to networks. Still, Broadcom's C-NIC optimized for blades probably won't have design wins before 2007 (see Broadcom Offers C-NIC for Blade). That's because it usually takes about 12 to 18 months for design wins in a particular area of development, and blades are lagging servers in R&D right now.

Broadcom also sees 10-Gbit/s Ethernet as a key milestone for IP SANs, which currently use 1-Gbit/s Ethernet, while Fibre Channel is moving from 2 Gbit/s to 4 Gbit/s (see More 10-Gig Ethernet SANs Planned).

The competition for 10-gig is heating up. Intel Corp. (Nasdaq: INTC) and startups have led the race to 10-Gbit/s Ethernet chips, with Astute Networks Inc., Chelsio Communications Inc., NetEffect Inc., and Neterion Inc. releasing products, as well as Siliquent (see Chelsio Brings Copper to 10-Gig, Neterion Channels 10GigE , and 10-GigE Hits Express Lane). Chelsio is probably Broadcom's biggest competitor on the storage side because its chips also have TCP/IP offload capability for iSCSI.

Siliquent's chips also fit that category. Like Broadcom's C-NICs, the startup's chips combine RDMA, iSCSI, and TCP/IP offloading on one chip. “Philosophically and technically, the design teams are as tightly aligned as any I’ve seen,” Young insists.

Young says Siliquent’s 50-plus person R&D staff will join Broadcom. Most of the engineers are based in Siliquent’s Tel Aviv facility, although the startup’s headquarters have been in Mountain View, Calif. A Broadcom spokesman says it is not clear yet what role, if any, Siliquent’s executives will play at Broadcom. Siliquent raised $40 million in funding since 2001, including $21 million last September.

Broadcom expects the deal to close by the end of September.

— Dave Raffo, Senior Editor, Byte and Switch