Henry T. Nicholas III
Co-chairman, chief executive, president
Henry Samueli
Co-chairman, chief technical officer
Broadcom Corp.
One way to gauge how busy the two Henrys of Broadcom Corp. were in 2000 is to look at the news their company generated.
Last year, Irvine-based Broadcom issued 67 press releases. In 1999, the company issued 44 press releases. In 1996, it issued all of four.
But Broadcom’s 2000 releases weren’t just promotional product announcements. A dozen of them detailed acquisitions. Others outlined pacts with companies such as 3Com Corp. and Gateway Inc., or the settlement of a legal row with Intel Corp.
Setting aside Broadcom’s recent downturn on Wall Street, co-founders Henry Samueli and Henry “Nick” Nicholas had a stellar year. The two were the Business Journal’s businesspeople of the year for 1998 and were strong runners-up for this year’s title.
When asked about Broadcom’s accomplishments this past year, Samueli, who is co-chairman and chief technical officer, skipped the acquisitions and named three products: bluetooth transceivers for wireless networking; 10-gigabit, synchronous optical network transceivers; and a new generation of ethernet transceivers. The products are just for starters, Samueli said.
“This was an amazing year for technology and achievements for Broadcom,” he said. “It’s hard to cite one, but several of them have driven us to the next level of technology leadership. That is what Broadcom is all about.”
The downside was Broadcom’s stock’s decline in 2000. Split-adjusted, the company’s shares actually were trading lower in late December from where they began the year. Back in August, Broadcom shares hit a high of 274. But the stock began declining when one of its major buyers, Cisco Systems Inc., said it had too much inventory. Concerns about the rollout of digital cable boxes and wireless networks also have weighed heavily on Broadcom.
Still, Broadcom remains Wall Street’s favorite company in Orange County, with a late-December market capitalization of $21 billion. The company’s valuation has allowed Samueli and Chief Executive Nicholas to go on a buying binge in the past two years, in which time they’ve purchased 17 companies.
The year’s biggest purchase by dollar value was the $2.07 billion acquisition of Santa Clara-based SiByte Inc., a developer of high-performance, highly integrated processor chips for networking and communications applications. It’s a small engineering firm with the prize being SiByte co-founder Dan Dobberpuhl, considered the guru of microprocessors for having developed the Alpha, a longtime standard in the industry. When the deal was announced, Nicholas called it the “most significant” acquisition ever for Broadcom.
There were plenty of other big deals for Broadcom (as valued by the day of the purchase): $1.28 billion for NewPort Communications, which is located across the street from Broadcom; $1.24 billion for Silicon Spice of Mountain View; $677 million for Israel-based VisionTech Ltd.; and $561 million for San Jose based Altima Communications Inc.
Broadcom’s bid to turn itself into an end-to-end supplier of broadband chips also meant paying a steep price for the untested. It paid $457 million in stock for El Segundo-based Innovent Systems Inc., which, at the time of the deal, didn’t have any revenue. But its patented products are considered leaders in the bluetooth technology, which is short-range radio technology aimed at simplifying communications among devices. And Innovent’s backers believed it had the potential for a $50 billion market cap.
In the coming year, Broadcom aims to continue its acquisition strategy, though that could be more difficult. The company’s lower stock price means Broadcom has $30 billion less of currency to wave around. It also means that Broadcom has to issue more shares to acquire companies, and run the risk of diluting its stock too much. Of course, the value of companies being acquired stands to be lower as well.
Samueli said he tries to not worry about the stock price.
“If the market’s going up and we’re going down, then I start worrying,” he said. “But if a whole industry is seeing a slump, then that’s life and we just coast through it and just focus on our business objectives. I try not to pay attention to that and focus on my perspective to generate new technologies for the company and make sure that long term we have an ability to execute on our vision.”
Broadcom’s share slide has bit into the fortunes of the two Henrys. As of late December, their stakes in the company were worth about $3 billion apiece, down from $9.5 billion each earlier in the year.
The company’s employee count has soared to 2,000, double from a year ago. In Irvine, Broadcom counts nearly 800 people.
“An extra 1,000 engineers have to be working on some exciting new products,” Samueli said. “We’re pushing very hard to expand our portfolio of products to greater than it has ever been in the history of the company. There are a lot of exciting things in the pipeline.”
