Eric Brandt, a self-described kid from Brooklyn and chemical engineer by training, has brought mainstream accounting to Broadcom Corp.
The change has been epic for Broadcom, where past policies led to legal issues over misdated stock option grants and financial restatements to reflect stock warrants granted to customers.
But bringing Broadcom’s once aggressive bookkeeping in line with the norms of big public companies may have been less challenging than coming to Broadcom after a decade in the drug industry, according to Brandt.
His first year at the chipmaker was “like drinking from a fire hose,” Brandt told a crowd of about 500 people at the Jan. 14 CFO of the Year awards presented by the Business Journal and the Orange County and Long Beach chapter of the California Society of Certified Public Accountants.
Brandt received the Public Company award for his nearly two years of work at Broadcom, a maker of chips for consumer electronics, networking gear and computers.
His first few weeks at Broadcom in early 2007 were a trial by fire, according to Brandt.
For one, he had a tough time deciphering the shorthand acronyms and tech speak of chipmakers.
“I couldn’t understand what was being said for the first month or so,” Brandt said. “I swear when I first started the job I thought people were speaking Mandarin. This is an industry filled with lots of acronyms, and I seemed to only get the pronouns.”
Pressure
Brandt had a lot riding on him when he joined Broadcom.
He replaced longtime financial chief Bill Ruehle, who stepped down months earlier as the issue of misdated stock options was unfolding at Broadcom.
Ruehle and cofounder and former chief executive Henry Nicholas, who left Broadcom in 2003, are set to stand trial later this year on federal fraud charges.
In early 2007, Broadcom restated several years of financial results to reflect $2.2 billion in charges for misdated stock options. The restatement bill was the largest of any company involved in the stock options issue.
It was Broadcom’s second major restatement because of accounting issues.
In 2001, the company revised results for 2000 to better reflect warrants to buy Broadcom shares that were issued to customers of companies it acquired.
Some investors complained the warrants were effectively customer discounts that artificially inflated Broadcom’s revenue and operating profit.
Brandt, who had served as chief executive of Aliso Viejo-based Avanir Pharmaceuticals, was recruited to help distance Broadcom from its past accounting. Earlier in his career, he was financial chief for Irvine drug maker Allergan Inc., earning two nods as one of the “Best CFOs in America” by Institutional Investor magazine.
There was intense pressure to perform, according to Brandt.
“I found that fear in some respects is a very good motivator,fear that someone will say you don’t know what you are doing,” he said.
There wasn’t a lot of time to get up to speed.
“We had our first analyst call a month after I joined,” Brandt said. “Couple the new industry and the new aspects of the job with a company that moves as fast as Broadcom does, and there’s no time for dust to gather.”
After nearly two years on the job, Brandt and Chief Executive Scott McGregor, who joined in 2005, are seen as drivers of change at Broadcom.
“We’ve had a goal to become more transparent over time,” McGregor told the Business Journal last year. “Hiring Eric Brandt as our CFO has also accelerated that. It’s a process where we want to act more the leader that we’ve become and meet that expectation from our customers and investors.”
Brandt said his overarching goal is to create “a blue chip image to the corporate side.”
Changes
Brandt’s taken a series of steps in the past year or so that has helped investors get a clearer view of Broadcom. Last year, the company started reporting financial results only according to generally accepted accounting principles.
Before, Broadcom reported two sets of results, GAAP and non-GAAP, which excluded charges for stock compensation, acquisitions and other items.
Broadcom’s old executives felt non-GAAP results were a better reflection of the company’s operations.
Late last year, Broadcom started including a breakout of its operating expenses in its quarterly results.
It also included a quarterly outlook with its earnings press release, something Broadcom usually only gave during conference calls or in filings with the Securities and Exchange Commission.
Brooklyn Boy
Brandt, 46, was born in Brooklyn and raised on Staten Island.
He has a bachelor’s in chemical engineering from the Massachusetts Institute of Technology and a business master’s from Harvard Business School.
Some were surprised to see Brandt leave the top spot at Avanir Pharmaceuticals to become chief financial officer at Broadcom.
He said he took the job at Avanir on high hopes that its Zenvia drug to treat a neurological disorder that causes involuntary emotional outbursts would be approved by the Food and Drug Administration.
Brandt said he waited more than a year with disappointing results.
“The company was going to shrink from 100 people to 25, and I concluded that that wasn’t my skill set,” he said. “When you deal with something like that you learn a lot about what it is you like and you don’t like. I like the financial aspects of the business and I like being part of a large organization with real resources.”
Brandt said he didn’t hesitate when Broadcom came calling, despite the options scandal that has led to salacious allegations about cofounder Nicholas’ time running the company.
“I thought about it, but I wasn’t concerned,” he said. “I was comfortable that the company had taken a hard look at itself. If the board and the CEO are committed to doing the right thing, then you will get there.”
