Broadcom May Scoop Sandburst
Some background: Sources say Broadcom has been hunting for some more business in the Ethernet network processor market and has already invested in Sandburst. Sandburst, which makes a range of Ethernet networking processing chips, has been making progress, being designed into a new Ethernet card that will go into 's (Nasdaq: JNPR) M-Series routers, says one Silicon Valley source. Broadcom feels that its partnership with EZchip Technologies, on the other hand, isn't doing as well. (See Net Processors Bloom at 10-Gig, Sandburst Debuts Traffic Manager, Net Processors Bloom at 10-Gig, and Net Processors Reach the Mainstream.)
With Sandburst, Broadcom would get the whole shebang of packet processing: a network processor, a switch fabric, and a traffic management chip, all tailored for the 10-Gbit/s market. Sandburst hasn't announced many customers, but it did ink a deal with Enterasys Networks Inc. (NYSE: ETS) last year and claims Hewlett-Packard Co. (NYSE: HPQ) as a customer. (See Enterasys Selects Sandburst Silicon.) Our source believes it may be close to a deal with Juniper.
But given Broadcom's penchant for high-volume markets, would a Juniper deal mean that much? "Sandburst has been targeting very high-end systems, which, outside of Cisco, don't generate much revenue," says Bob Wheeler, analyst at The Linley Group. "I'm a bit mystified why Broadcom would care that much about Juniper."
Broadcom was one of the holdouts in the network processor craze circa 1999-2000. Big names such as Agere Systems Inc. (NYSE: AGR.A), Applied Micro Circuits Corp. (AMCC) (Nasdaq: AMCC), (Nasdaq: INTC), and Motorola Inc. (NYSE: MOT) either cultivated network processor businesses or bought their way into the sector. Broadcom sort of joined in with the purchase of SiByte, but SiByte's chip was more a general-purpose processor, not a packet-forwarding specialist.
Broadcom's move to delay investment in network processors looks wise in hindsight, because other companies had to trim or derail their high-end network processors. AMCC and Intel concentrate more on access chips these days, and Wintegra Inc. hopes to go public on the strength of that sector. (See Access Pays Off for Agere, Intel Isn't Through With NPUs, and Chip Startups Process Profitability.) Sandburst raised at least $72 million in venture funding. (See Sandburst Secures $15M.) A closely-placed Massachusetts source says that if the deal is indeed in the ballpark of $120 million, it's unlikely that rank-and-file employees and shareholders will receive much of a windfall, as the venture capitalists will take most of it through liquidation preferences.
— R. Scott Raynovich, Editor in Chief, and Craig Matsumoto, Senior Editor, Light Reading