For all the changes that have played out at Irvine-based Broadcom Corp. in the past few years, the chipmaker seems to have hit another turning point.
A Broadcom committee just finished its review of options backdating and is set to determine just how much the company will have to eat on them. Best estimates are $1.5 billion or more.
Meanwhile, Broadcom is working with the Securities and Exchange Commission on the government’s formal investigation into the matter.
Broadcom is looking to move beyond the episode. Notably, without the man at the center of it all: former chief financial officer Bill Ruehle.
Ruehle was shown the door in September amid Broadcom’s own probe into the dating of stock options. And last month, Broadcom seemed to put a little more distance between it and Ruehle.
For options granted from 1998 to 2003, “certain executives and employees selected numerous grant dates after the fact,” Broadcom said in a statement.
“Each of the individuals deemed to have been actively responsible for the selection of option grant dates after the fact has either previously left the company for reasons unrelated to the options investigation, or has recently departed Broadcom as a result of the investigation,” the company said.
Broadcom didn’t say who else left besides Ruehle. The company canceled $33 million in options granted to Ruehle.
A few years back, Ruehle was part of the team that pushed warrants to Broadcom’s suppliers, calling them good will.
Shareholders saw the warrants, which converted to stock, as discounts and rebates that artificially boosted revenue. In the end, Broadcom settled the issue in 2002 and restated results.
Some could see the latest move as another sign of Broadcom growing up.
The company’s earlier rite of passage: the 2003 exit of cofounder and former chief executive Henry Nicholas. The executive was known for his brashness, which befit the chipmaker in the late 1990s but grew tiresome during the downturn earlier this decade.
Like Nicholas, Ruehle had roots in the early days of Broadcom and worked on the company’s 1998 initial public offering. His financial work was fitting with Broadcom’s early years but came under scrutiny in the Sarbanes-Oxley era.
Fabless Chip Sales
Chipmakers that design their products and contract out for their production,including Broadcom and Newport Beach-based Conexant Systems Inc.,reported $12 billion in third-quarter sales, according to the Fabless Semiconductor Association, a Dallas-based trade group.
Not surprisingly, a big chunk of third-quarter sales came from Broadcom.
The company, which had $903 million in sales for the quarter, came in second among the 10 most fabulous fabless companies.
Archrival Qualcomm Inc. topped the list with $1.1 billion in quarterly sales. Broadcom and San Diego’s Qualcomm are in a legal battle over patents for wireless chips.
Sales at fabless chipmakers fell 2% from the second quarter but rose 25% from a year earlier. Broadcom’s revenue grew 30% in the third quarter from a year earlier.
Gateway Trading
In the days after avoiding a proxy fight, Gateway Inc. Chief Executive Ed Coleman and newly appointed director Scott Galloway upped their holdings in the computer maker as founder Ted Waitt continues to shed his shares.
A day after being appointed to the board, Galloway bought 6,500 shares, increasing his stake to 206,579 shares. Galloway’s Firebrand Partners LLC owns about 11% of Gateway.
His appointment to the board expands the number of directors to nine, with a 10th to be named by February. The move also avoids a potential shareholder show- down.
Firebrand threatened to run a slate of candidates in a bid to revive Gateway.
Coleman, who has been in place since September, added 100,000 shares a day after Galloway, bringing his total stake to 179,275 with remaining options for more. It was his first stock buy since joining.
Founder Waitt, who’s playing less of a role at Gateway in favor of philanthropy in San Diego, sold nearly 700,000 shares in December alone. It’s the latest in string of sales by Waitt this year.
Electronic Payment
Aliso Viejo-based Transcepta LLC, a maker of software for electronic invoicing and payments, just closed a second round of funding totaling $3 million.
The company plans to use the money to expand its operations and marketing.
Tech Coast Angels, a loose group of investors in Orange County and elsewhere in Southern California, led the round. The group also led Transcepta’s first funding in 2005.
