They’re Cisco Kids, With Some Quirks
Vinod Dham, chief executive of Mountain View chipmaker Silicon Spice Inc., was awake for more than 26 hours the day Irvine-based Broadcom Corp. announced it was buying his company. Along with Henry Nicholas, Broadcom’s hard-charging chief executive, Dram went without sleep for a day earlier this month as the two readied the acquisition announcement and then made presentations to the press, answered investors’ questions and met with analysts.
When exhaustion finally got the best of Dham, he told his new boss he couldn’t go on anymore and begged to go lie down somewhere. “You passed the test,” Nicholas said. “Welcome to Broadcom.” Dham is just one of 13 chief executives that probably could swap similar stories as Broadcom continues a buying spree that has totaled more than $5 billion in deals in the past two years. In the latest one, Broadcom said last week it plans to pay $1.3 billion for NewPort Communications Inc. of Irvine. But for Broadcom, the real work is just beginning. The company appears to be following the aquisition strategy molded by one of its larger customers, San Jose networking equipment maker Cisco Systems Inc. One of Cisco’s biggest strengths, observers say, is its knack for acquiring and integrating new companies into its business and culture. Broadcom is looking to do the same, and according to some familiar with Cisco’s strategy, the Irvine chipmaker has gotten off to a promising start. Initially, Broadcom thrived on its engineering prowess,starting with that of Nicholas and co-founder and Chief Technical Officer Henry Samueli. But starting in early 1999, the company began acquiring other chipmakers in a bid to dominate anything related to high-speed data communications.
Integration is Challenge
While analysts and investors have praised Broadcom’s selections, the company’s ability to blend them into a cohesive whole could be the single biggest challenge for the company in coming months. Acquisitions have become so common for Broadcom that it has formed a semi-permanent mergers and acquisitions team that coordinates things such as accounting, human resources, marketing and Web sites of the companies it acquires. The 20-person group comprises representatives of Broadcom’s administrative departments and meets every week or so. “It’s like d & #233;j & #341; vu all over again,” said Adam Stein, a marketing director with Broadcom’s home networking business in Sunnyvale. Before joining Broadcom by way of its acquisition of Epigram Inc. last year, Stein worked for Cisco, where he took part in 20 acquisitions in a four-year period. In some ways, Broadcom could have an easier time of it than Cisco has. For one, Broadcom’s purchases have involved earlier-stage companies, which haven’t accumulated much corporate baggage.
Corporate Culture Important
And according to those on both sides of Broadcom’s recent buyouts, the company vigorously pre-screens potential acquisitions for similar corporate cultures. A penchant for Broadcom’s relentless work ethic, which often involves 12- and 16-hour days, is as important as having an attractive technology.
Compatibility allows Broadcom to take a hands-off approach to running the new divisions.
“Nick’s philosophy is basically leaving you alone,” said Stein, referring to Nicholas. “Unless you give him a reason to be a pain in the ass,not making your numbers, not innovating, not getting design wins,he expects you to do exactly what you’ve been doing from Day One.” NewPort Communications co-founder and chief executive Armond Hairapetian, agrees.
“We’re going to stay pretty much the same way we are,” he said. “The cultures are very similar.”
Employees Stay Put
Because the acquired companies continue doing much of their business as usual, employees generally stay put. Acquired companies typically become new business units, with their former chiefs acting as general managers and in much the same capacity as before. So far, Broadcom has selected companies with little overlap, making layoffs unnecessary. But all the autonomy doesn’t mean that Broadcom doesn’t fully assimilate the new company’s technology and research. Almost immediately after the deal closes, department heads share their work, a concept engineers there call “spreading the DNA.” For the CEO of an acquired company, one of the hardest parts about joining Broadcom,not counting Nicholas’ middle-of-the-night phone calls and exotic culinary leanings,might be working under the shadow of an executive with his magnetism. “All of my employees love him,” Dham said, recounting the dinner in which he and Nicholas broke the news to Silicon Spice employees. Nicholas stayed until 2:30 a.m. answering questions.
“I have to admit, when I saw all my guys surrounding him, I was a little depressed,” Dham said. n
