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Broadcom Scores New CEO

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Light Reading
10/26/2004

Broadcom Corp. (Nasdaq: BRCM) has appointed Scott A. McGregor, the former CEO of Philips Semiconductors (NYSE: PHG), as its new chief executive.

The move comes hours after Broadcom announced its debut as a serious player in storage controllers and less than a week after its claim to be seeing stronger orders for the present quarter (see Broadcom Struts Storage Stuff, Broadcom Unveils iSCSI Controller, and Chip Gloom Shall Pass).

McGregor, who is 48 and has a Master's degree in engineering from Stanford, resigned his CEO post at Philips Semiconductors, one of five divisions of Royal Philips Electronics N.V. (NYSE: PHG; Amsterdam: PHI), in September 2004, claiming personal reasons, specifically a wish to return to the U.S. after living abroad. He'd been at Philips since 1998 and in the post of CEO at Philips Semiconductors since September 2001.

A software geek by training, McGregor's jobs prior to Philips included stints at the Santa Cruz Operation (a maker of SCO Unix products) and at the Xerox Palo Alto Research Center, where he reportedly worked on the first version of Microsoft Windows.

Broadcom seems ready for him. Outgoing CEO Alan E. "Lanny" Ross, who will retire in January, has been "interim CEO" since replacing former CEO and cofounder Henry Nicholas at the start of 2003 (see Big Day at Broadcom). Broadcom's other founder, CTO Henry Samueli, remains chairman of the board.

Once he takes the top spot, McGregor will also take charge, albeit indirectly, of Broadcom's new storage initiative. Tom Lagatta, Broadcom's VP and GM of its enterprise computing business group, which is responsible for the storage products, will report to McGregor.

At least one analyst thinks McGregor's arrival bodes well. "Mr. McGregor appears to be a good choice for Broadcom at this stage in its history," writes Allan Mishan of CIBC World Markets in a note today. "He has extensive experience running a large communications and consumer semiconductor business... He also has experience incubating and growing new businesses..."

On the downside, Broadcom's at a crucial juncture. The company's weathered some setbacks, such as recently reduced guidance for the present quarter (see Broadcom Lowers Q3 Guidance and Broadcom Reports Q3). Indeed, McGregor's arrival comes at a turning point for the company, which continues to hold its own in the communications chip market while attempting more focused forays into telecom and storage networking.

There's competition, too, particularly in the area of storage chips. Agere Systems Inc. (NYSE: AGR.A) is one example, despite its considerable problems (see Agere Wields Jobs Axe). Indeed, Agere was rumored to be a possible buy for Broadcom earlier this month (see Rumor: Is Broadcom Buying Agere?). Another competitor, Intel Corp. (Nasdaq: INTC), however, isn't as challenged and has made it clear it also intends to play in storage.

McGregor has the earmarks of a solid leader: At Philips, his division had over 35,000 employees, and its third-quarter revenue of €1,388 million accounted for about 19 percent of the parent company's total for the period. In a prepared statement, Royal Philips CEO Gerard Kleisterlee had this to say about McGregor leaving last month: "Whilst we respect Scott McGregor's personal decision to return to the United States, we regret to see him leave. He has led the Semiconductors division through one of the most difficult periods in its history and managed to turn it around successfully into a leaner business with a strong focus on innovation."

Must be music to Broadcom's ears.

— Mary Jander, Site Editor, Byte and Switch

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