Cash is king at Broadcom Corp. these days.
After the last quarter wrapped up in March, the Irvine-based chipmaker was sitting on a wad of nearly $2 billion,about twice what it had a year ago.
The company’s cash total is more than its total sales in 2003. Last year Broadcom recorded $2.7 billion in sales.
What do you do with so many greenbacks? Broadcom traditionally has used cash to help fund acquisitions,the communications chipmaker has made quite a few in the past years.
From 2003 to 2005, the company spent more than $200 million in cash,along with some stock,to buy 11 companies (based on initial acquisition prices).
Broadcom has made no secret that it’s open to more acquisitions. The chipmaker sees them as a key way to enter markets where there’s lots of potential.
During its shareholder meeting late last month, Chief Executive Scott McGregor said Broadcom continues to search for more buying targets.
What’s next?
Broadcom’s “strategic plans” for its cash hoard was the topic of a question by Needham & Co. analyst Charlie Glavin during a conference call with analysts last month.
Well, the company doesn’t plan on unloading the $2 billion entirely on acquisitions, said Chief Financial Officer Bill Ruehle, in answer to Glavin’s question.
The analyst said his next question was a little bit more “hardball.” Glavin asked about disk drive companies. He said it was his understanding Broadcom had gone after a couple of acquisitions in the sector but came up short. He added that Broadcom might have been outbid on one.
Glavin said disk drives could play into Broadcom’s push into cell phone markets,because the devices are requiring more storage,among other things.
“We continue to look at the storage market,” McGregor said. “We’ve got a number of products out there today in the enterprise storage space, server storage space that we work on.”
Ruehle noted the company is in the midst of buying back about $500 million in shares. That strategy is eating up cash.
At the shareholders meeting, McGregor got a question about whether Broadcom would consider a cash dividend.
McGregor said “we have discussed” the idea, but decided not to go that way for now.
However, he added that if “we continue to see strong cash build up,” the company would consider a cash dividend.
Where is the cash coming from? It’s not just from net income, which about doubled to $400 million last year.
A lot of cash is coming from options holders who are cashing in. With the stock up so much,it’s about doubled during the past year,employees are exercising their options. That means they buy the stock at a set price and turn around and sell it at the market price, pocketing the extra cash.
Broadcom said about $385 million in cash came from stock options being exercised in the past quarter.
More Broadcom …
The shareholders meeting for Broadcom in Newport Beach wasn’t exactly standing room only.
The meeting had,at most,50 shareholders and many more empty seats.
The sparseness of the crowd prompted a question about attendance from the floor. McGregor said the company is a “non-controversial” stock that doesn’t attract a lot of attention at a shareholders meeting.
Still, he probably wouldn’t mind if a few more people showed up next year.
“Invite your friends,” he told shareholders with a chuckle.
Alphabet Soup
Linksys in Irvine has made the jump into the next-generation of wireless networking.
Linksys, which is a division of San Jose-based Cisco Systems Inc., said April 24 it was selling products for the “draft” specifications for 802.11n.
That’s a bit of techno-speak for what’s hailed as the crucial step in creating the “digital home,” which promises to wirelessly connect everything from the television to the Internet to the air conditioning controls in a house.
Essentially the wireless platform is fast enough to easily handle the amount of data created by high-definition television or digital music, among other things. Data transferred over the 802.11n platform can reach four times as far and go many times faster than 802.11g. The 802.11n standard is expected to be finalized within a year.
Also in the mix is Taiwan’s D-Link Corp., which has its North American headquarters in Fountain Valley. The Linksys competitor has said it will ship 802.11n “draft” products as well.
Amp’d Keeps Making Noise
Wow. Amp’d Mobile Inc. continues to haul in the funding.
The edgy cell phone company, which was founded in Aliso Viejo but moved to Los Angeles, has landed about $150 million in new funding. That pushes its total to about $250 million.
Amp’d has raised most of the funding during the past eight months.
The latest round featured participation from several new investors, including Intel Capital, part of Intel Corp., and Polygon Investment Partners in London.
Last year, the company moved out of Aliso Viejo to be closer to the media hub in L.A.
