Broadcom Corp. still has an appetite for acquisitions, but it has taken to nibbling off the hors d’oeuvres tray while digesting last year’s smorgasbord.
The Irvine chip designer quietly acquired KimaLink, based in Santa Ana, and PortaTec Corp. of Fremont in June, even as it moved ahead with a companywide effort to streamline its business. The company didn’t notify investors of the two acquisitions because they were too small, said Broadcom spokesman Bill Blanning.
“These were small, non-material acquisitions,” Blanning said.
The two companies bring Broadcom’s acquisition total to 20 since going public in 1998.
Details of the two recently acquired companies are sketchy, but some of the engineers at KimaLink were working on wireless chip technology, according to one employee’s resume. There was no information immediately available on PortaTec; the company’s Web page automatically jumps to Broadcom’s site.
Both companies were small, according to incentive plans outlined in a recent Securities and Exchange Commission filing. Broadcom registered only 85,800 shares for its KimaLink plan and 119,625 shares for the PortaTec plan. Broadcom has 261 million shares outstanding, trading in the 30-to-50 range since March.
The acquisitions come as Broadcom has worked to digest earlier ones, which gave the company too many employees after a downturn in the chip sector. In June, the same month it acquired the two small companies, Broadcom announced it would realign certain businesses and lay off some its staff. The company has been in the process of firing a couple hundred employees across its operations as part of that effort.
Broadcom has looked to mount a comeback after a tumultuous year. In the past 12 months, the company has lost billions of dollars in market capitalization as its share price went from a high last year of more than 270 to a recent low of 20.
In its bid to prepare for a comeback, Broadcom has bumped up its research spending. 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 from work being done at recently acquired companies, Broadcom’s research spending has steadily risen at least 20% quarter-to-quarter for the past year. And Broadcom Chief Executive Henry Nicholas suggests the company plans to invest more.
“A contraction in the market can play to our advantage over the long term,” Nicholas said earlier. “We’re well-positioned to benefit from a re-acceleration of the economy.”
The KimaLink and PortaTec deals reveal Broadcom’s intention to hire engineering talent, something Nicholas has said he’ll continue to do despite the round of layoffs.
“One thing I will not do is cut off the life blood of this company,” he said at a recent shareholder meeting. “We will add top-tier people.”
The recent acquisitions also speak to Broadcom’s attempts to diversify into new businesses, which it had hoped to do during the market downturn. While Broadcom makes chips for a single segment,communications,the company sells semiconductors into 12 markets within that segment, the result of as many acquisitions last year.
“This is not a good time to be a single-market company,” Nicholas said earlier this year. “One thing about Broadcom is that we are able to go off and enter new markets. We place products into markets in which we have no market share.” n
