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Broadcom’s Growth Slowing, But Gains Still Enviable

Perhaps only Broadcom Corp. could see its sales growth rate halved and still make it into the top tier of Orange County’s fastest-growing companies.

For the year ended June 30, the Irvine-based chipmaker posted sales of $1.18 billion, up from $112.89 million three years ago. That is a 946% gain,enough to rank third among OC’s fastest-growing companies, though down a notch from No. 2 on last year’s list.

Broadcom’s heady three-year growth rate comes despite a slowdown in the past year. Like other chipmakers, Broadcom has seen slower demand for networking, wireless and computer gear take its toll.

In 2000, Broadcom’s sales more than doubled. This year, it’s on track to grow by 60%. While the pace still is enviable, it is a retrenchment from Broadcom’s heady days.

“No one foresaw the swift decline in the tech market that we’ve seen. No one did,” Chief Executive Henry Nicholas said recently. “Our job is to execute on a business plan whether stocks go up or stocks go down.”

The company has lost billions of dollars in market value as its stock went from a high last year of more than 270 to a recent low of 29. A group of shareholders also slapped the company with a lawsuit after news broke about how Broadcom accounted for certain sales that were accompanied by warrants to buy its stock.

Still, Broadcom has pursued a culture of growth by consumption. Broadcom has bought 20 companies in the past three years. In June, it acquired two development-stage companies, Santa Ana-based KimaLink and PortaTec Corp. in Fremont.

Broadcom executives have decided to invest in the future rather than lament the past. In the first quarter, Broadcom saw one of the biggest jumps in research spending in the company’s history,up nearly $50 million from the fourth quarter. Though partly attributable to work being done at recently acquired companies, Broadcom’s research spending has steadily risen at least 20% quarter-to-quarter in the past year. And Nicholas suggests that the company plans to invest more in coming months.

The result, he said, is new design wins for Broadcom.

“We’ve gotten a clean sweep of all design wins over all our major customers,” Nicholas said, citing Cisco Systems Inc., 3Com Corp. and Motorola Inc.

Still, there are realities to cope with,like controlling expenses. The company laid off about 200 employees in June, slowed down hiring plans and has worked to slash costs elsewhere. n

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