Year in review: Chief Executive Scott McGregor logged his second year on the job in 2006 and saw a good part of it dominated by a backdating scandal that predated him and a slowdown in the chip sector.
Broadcom managed a falloff in chip buying last year. By the fourth quarter, the company reduced its inventory by $20 million from the prior quarter to $202.8 million.
It was turning stockpiles of chips into sales at a rate of 8.8, up from 7.9 in the third quarter. One analyst calls Broadcom’s handling of inventory “best in class.”
In December, Broadcom ended its probe of misdated stock options, resulting in a $2.2 billion charge against earnings from 1998 to 2005 detailed in January.
Longtime chief financial officer Bill Ruehle stepped down in September amid the probe.
In November, Broadcom paid $62 million for LVL7 Systems Inc. of Research Triangle Park, N.C., a maker of software that works with the company’s networking chips.
All the while, Broadcom sparred with rival Qualcomm Inc. of San Diego over patents and other issues.
What’s ahead: Last year’s chip glut spilled over into this year. But analysts see a rebound by summer for chipmakers with Broadcom a favorite of many.
Broadcom should get a boost with the expected summer release of Apple Inc.’s iPhone, for which the company provides a controller chip. The emphasis is on consumer electronics again this year for Broadcom.
The company already is selling chips for dual-format DVD players that can handle HD-DVD and Blu-Ray discs.
In March, the company moved to a 685,000-square-foot campus at University Research Park in Irvine, leaving its longtime Irvine Spectrum headquarters. The backdating scandal isn’t over, though Wall Street largely has put it behind the company. Federal authorities are “seriously considering” charges against Ruehle and one other executive, according to the Wall Street Journal.
The company’s own probe found no wrongdoing by current management. Charges against former executives could keep the issue alive for a company that’s trying to move on. Some fights with Qualcomm have been settled.
Others remain, including a U.S. International Trade Commission penalty due next month against Qualcomm for infringement on a Broadcom patent.
Wall Street’s take: Analysts are bullish on Broadcom coming out of the industry’s glut. Shares are flat for the year and off nearly 30% in the past year. In March, Stifel Nicolaus upgraded Broadcom’s stock.
Earlier this month, Wedbush Morgan Securities pointed to Broadcom as a likely gainer in the chip sector’s rebound. A recent Barron’s headline: “At Last, Broadcom Looks Ready to Rally.”
,Dan Anderson
WHO’S IN CHARGE
SCOTT MCGREGOR
Chief executive, Broadcom
Joined company: 2005
Education: bachelor’s, master’s in computer science and engineering, Stanford University
Career: Was head of Royal Philips Electronics NV’s chip unit, Philips Semiconductors, from 2001 through 2004. Joined Philips in 1998 as head of its emerging business unit, which covered smart card, radio frequency identification technology and digital media. Before Philips, held various positions with network device maker Santa Cruz Operation Inc. from 1990 on. Prior to that he was with Digital Equipment Corp., Microsoft Corp. and Xerox Corp.’s Palo Alto Research Center.
Notable: Writes an internal blog that charts his recent trips or thoughts about the company.
Headquarters: 5300 California Ave., Irvine
Employees: 5,233; 1,617 in OC
Business: chipmaker
Market value, as of April 2: $17.9 billion
2006 revenue: $3.7 billion, up 37%
2006 net income: $379 million, up 3%
