SEARCH ENGINE
Broadcom May Be Stepping Up Effort, Hedging Bets With Ross Just in Case
By ANDREW SIMONS
It could be on again.
Broadcom Corp.’s stop-and-start search for a permanent chief executive to replace Alan “Lanny” Ross might be picking up steam, according to sources close to the company.
The Irvine chipmaker reportedly has hired Chicago-based executive searcher Heidrick & Struggles International Inc. in what could be a sign the chipmaker is stepping up its efforts, one source said.
Heidrick & Struggles officials didn’t return calls for this story.
The company cancelled its contract with Cleveland-based executive searcher Christian & Timbers last year.
Meanwhile, Broadcom workers are said to be buzzing about how much longer Ross will be their boss, according to one former worker with ties to the chipmaker.
Broadcom has been searching for a top executive since the abrupt departure of cofounder Henry Nicholas in early 2003. That’s when Ross, who had been chief operating officer since late 2002 and a director since 1995, stepped in.
For much of this year, the executive search has taken a backseat to more pressing business issues.
Asked about the search, Broadcom spokesman Bill Blanning said: “The search process still is active and ongoing.”
The search has had its share of tumult.
Last year Broadcom appeared to be close to hiring Charles Giancarlo, a senior vice president with Cisco Systems Inc.
During talks, Ashok Kumar, an analyst formerly with U.S. Bancorp Piper Jaffray and now at Raymond James & Associates Inc., issued a report saying that Broadcom was close to landing Giancarlo.
The leak reportedly prompted Giancarlo to withdraw and made for an awkward situation with Broadcom courting an executive at one of its bigger customers.
Several runners-up also were said to have pulled out after learning the search had passed over them in favor of Giancarlo.
The situation hasn’t been dire with Ross at the helm. The chip industry veteran has brought maturity to once unruly Broadcom and is liked by Wall Street.
Moreover, Ross has left his mark, streamlining the company, making acquisitions and steering Broadcom into a new market,chips, software and controllers for data storage.
“He has been a dream for Broadcom,” said one executive search source. “CEOs normally make decisions with their egos in mind. Lanny doesn’t do that. He just does the right thing.”
Broadcom’s compensation plan for Ross takes a long view,with an out should the chipmaker find somebody in the near term.
The plan runs through August 2007, with the bulk of it consisting of restricted stock issued quarterly after Nov. 15, according to a recent filing with the Securities and Exchange Commission.
The issuance is part of a 100,000-share grant. Specifically, Ross gets 5,556 shares vesting through Nov. 15. Another 83,330 are set to vest for each three-month period after that until May 2007. The remaining 11,114 units vest if Ross stays through 2007.
Should Broadcom find a successor, or in the unlikely case the company is acquired, Ross’ shares fully vest.
For now, Ross is wrestling with a slowdown in the chip industry’s yearlong comeback.
Earlier this month, Broadcom lowered its sales outlook for the third quarter, citing delayed orders from buyers. One of them is thought to be satellite TV provider EchoStar Communications Corp.
Revenue now is seen coming in even with the second quarter’s $641 million, versus an earlier expectation of 5% sequential growth.
Some may be wondering if the extent of the slowdown and a buildup in unsold chips took Broadcom by surprise.
The chipmaker is “facing some near-term challenges,” Ross said in a conference call.
Even so, Ross proved deft at delivering bad news. Broadcom’s stock rose nearly 10% the day of the announcement as investors showed relief the revision wasn’t as bad as expected.
Still, the bounce wasn’t enough to offset losses in Broadcom shares for the year. Since Broadcom’s June 30 high, its shares are off 40%.
The Philadelphia Stock Exchange’s chip index is down 15% for the same period.
Ross, 69, has had health issues in the past couple of years. The company disclosed earlier this year that he had undergone heart bypass surgery. Two years ago, he had hip surgery.
Ross, who otherwise is in good health, has said he would like to run Broadcom permanently “if I were 20 years younger.”
ALAN “LANNY” ROSS
& #149; Broadcom chief executive, president
& #149; Named chief operating officer in 2002, chief executive in 2003
& #149; Director since 1995
& #149; Recently granted stock currently worth $2.9 million; vests in next three years if Ross stays or successor is found
& #149; Paid $3 million in options, salary, other benefits last year
& #149; Has cut costs, trimmed 11 divisions to four business units, settled lawsuits, overseen move into data storage, several acquisitions
& #149; Shooting to double yearly revenue to $4 billion, with four divisions contributing
equally
& #149; A healthy 69, underwent heart surgery this year, hip surgery in 2002
& #149; Gained fame at Rockwell Semiconductor, now Conexant, in early-1990s; stints at National Semiconductor, Fairchild Semiconductor
& #149; Drives Chevrolet Impala to work. Last year, bought 90-acre Montana ranch just before going to auction.
& #149; Main home in Seattle. Lives in executive housing in Irvine
