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Intel Out for Broadcom Blood

Light Reading
News Analysis
Light Reading
8/31/2000

It's too early to tell whether the lawsuit filed this week by Intel Corp. (Nasdaq: INTC) against chip rival Broadcom Corp. (Nasdaq: BRCM) will affect Broadcom's optical components, which the company is just starting to market.

Intel says it's suing to halt what it calls "willful" patent violations by Broadcom in a number of areas, including "cable products, high-speed networking products, even semiconductor package configurations."

Intel says Broadcom purposely stole the patent information via bogus employee interviews, then covered up the evidence of its malfeasance.

When asked by Light Reading whether Intel's accusations extend to Broadcom's recently introduced optical components, Intel spokesperson Chuck Mulloy said, "It's too early to tell. We're still in the discovery process."

For its part, Broadcom says the lawsuit "will not" affect its optical products, and probably not the other products in its line. "The first we'd heard of the suit was yesterday, when reporters started calling us with copies," says Broadcom spokesman Bill Blanning. "Intel apparently gave copies of the suit to a few select reporters." He says Broadcom is confident of the "soundness" of its use of technology and promises a "rigorous defense."

Still, the suit could be a major nuisance at the very least to Broadcom, and a disaster at the worst. The text of the suit indicates that Intel is after blood. It wants a court trial, followed by the awarding of damages (with interest), payment of Intel's legal expenses, and permanent termination of the use of any Intel patents by Broadcom.

The suit strikes at the heart of Broadcom's chief claim to success -- its gigabit Ethernet, xDSL, cable modem, and home networking components. These products have been enormously successful, as evidenced by Broadcom's latest earnings report (see Broadcom 2Q Revenues Up 105% Over '99). According to Intel, all of Broadcom's products in each of these lines somehow violate several patents filed by Intel in the late 1980s and early 1990s. The Intel patents, as referenced in the text of the suit, seem to apply to a broad range of technologies used in communications and video products.

So, Broadcom's optical networking chips may not be immune to Intel's litigation. If a court finds Broadcom guilty, it could stop the progress Broadcom's taken in optical networking. That progress includes the release this past May of a controversial 10-Gbit/s Ethernet chip (see A Tall Tale of 10-Gig ). It also includes OC192 Sonet chips Broadcom hopes to add to its product line as a result of its intended purchase of NewPort Communications Inc. for $1.24 billion (see Broadcom Buys Its Way In).

So far, it looks as though news of the suit hasn't negatively affected the stock price of either Intel or Broadcom. In fact, in trading today, Broadcom's stock rose 11.56 points to close at $250. Intel's had risen 1.38 points to close at $74.88.

-- by Mary Jander, senior editor, Light Reading http://www.lightreading.com

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