Why Broadcom Might Buy BroadLight
Earlier this week, Israeli financial news site TheMarker reported that an acquisition by Broadcom, valuing BroadLight at US$230 million to $340 million, is imminent.
Such a deal would help Broadcom's PON bragging rights, reckons Jag Bolaria of The Linley Group , who sees a rising rivalry between Broadcom and Qualcomm, which both target communications and have reached the same multi-billion-dollar plateau.
They're not perfectly matched in every single market, but you have to admit, the idea has good Highlander-style potential.
So, would BroadLight make Broadcom's PON offerings more, er, width-enhanced? Probably so, Bolaria thinks. "They would pretty much become the No. 1 guy for GPON," he says.
Broadcom already has some PON knowhow. It developed BPON with BroadLight back in the days when Lost was still new. It acquired chip vendor Teknovus last year, which provided an entry into the Asia/Pacific EPON market. (See Broadcom to Acquire Teknovus.)
And Broadcom did break into GPON already, back in 2009, selling into the Verizon Communications Inc. (NYSE: VZ) network. (See Broadcom Breaking Into GPON? and Broadcom Unveils GPON Chips, and Broadcom Blends GPON With MoCA .)
But those GPON chips targeted the Optical Network Unit (ONU) -- the more commoditized, customer-premises side of a PON connection. BroadLight would give Broadcom some established products for the Optical Line Terminal (OLT), serving the infrastructure end of PON.
What Bolaria really likes about the idea of this acquisition is that it would be cheap. For Broadcom, with cash holdings of $3 billion, it would be little more than a bump in the soda budget.
"Getting BroadLight for a couple hundred million is probably nothing to somebody like Broadcom, and they would pretty much become the No. 1 guy for GPON," Bolaria says.
A move by Broadcom wouldn't be a total surprise. Globes pointed out that Broadcom invested in BroadLight in 2004 and has periodically considered an acquisition.
(Broadcom didn't return an email requesting comment. Light Reading also tried to ping a BroadLight representative but hasn't heard back.)
There can be only one
So is challenging Qualcomm the main catalyst for Broadcom's reported interest in owning BroadLight? It's likely not the motivation for such a deal, but Bolaria thinks the stage is set for a major Broadcom/Qualcomm rivalry (they have already sued each other) and that could become a consideration as Broadcom picks its acquisitions.
The rivalry would stem from Qualcomm's ranking as the world's fifth-largest chip company, while Broadcom is sixth -- with no other companies of that size focusing on communications.
In other words, they're both at the top of their field. "Broadcom's real competition in the race to see who's going to get the next billion dollars is Qualcomm," Bolaria says.
And Qualcomm happens to have gotten into PON -- Broadcom's turf, in a sense -- by acquiring Atheros. The deal doesn't make Qualcomm a big PON player, but still, Broadcom might want to take the opportunity to surge in an area where Qualcomm is just starting out.
Separately, Broadcom said Thursday that it wants to take the offensive in baseband chips, a market where Qualcomm has the definitive lead.
— Craig Matsumoto, West Coast Editor, Light Reading