Change will start at the top at Irvine-based Broadcom Corp. when a $37 billion sale to fellow chipmaker Avago Technologies Ltd. is poised to usher out longtime Chief Executive Scott McGregor and bring cofounder Henry Nicholas back to the company’s fold.
McGregor is expected to leave Broadcom with a severance package estimated at $67 million.
Nicholas is slated to take on a role of adviser to Avago, which is officially domiciled in Singapore for tax purposes and has its U.S. operations based in San Jose. The particulars of his adviser’s post with the combined company have yet to be spelled out, but the title will be his first connection with Broadcom besides stock ownership since he stepped down as chief executive in 2003 to attend to personal difficulties.
Broadcom Chairman Henry Samueli, who cofounded the company with Nicholas in 1991, is set to join the board of the combined company and retain his title of chief technology officer after the sale.
Nicholas and Samueli remain the largest owners of Broadcom voting stock, with stakes of 25% and 22%, respectively. Each has expressed support for the sale to Avago; neither could be reached for comment last week.
Broadcom’s Start
The two started the company in 1991 in Nicholas’ garage in Redondo Beach after each invested $5,000.
Samueli has been lauded for his strategic guidance and professorial approach during the company’s growth into one of the 10 largest chipmakers in the world.
Nicholas was a doctoral student under Samueli at the University of California-Los Angeles, and the two worked together at TRW Inc. Nicholas is credited by some Broadcom insiders and observers as the visionary and driving force during the company’s formative stages.
His return to Broadcom will end a 12-year absence from the local and global technology scene. He has spent the time on various philanthropic and political efforts, including a role as a key backer in a campaign to defeat Proposition 66—a ballot referendum that aimed to modify California’s three-strikes law. He also led lobbying efforts for Marsy’s Law, named for his sister, who was murdered in 1993. The law, which passed in 2008, provides a number of protections for victims of crimes.
Nicholas also has backed some small-business ventures in recent years. He quietly launched Aliso Viejo-based Level 7 Artists production company, which was behind Sublime’s 2009 reunion tour with lead singer Rome. Level 7 is dedicated to fusing technology, media and music, according to Nicholas. It plans to eventually roll out unspecified interactive music projects.
The deal that will bring Nicholas back to Broadcom in terms of operations also marks the end of a chapter in the history of Orange County’s most successful technology company.
The next chapter, though, will be written under the Broadcom name—Avago has said it will go by Broadcom Ltd. once the deal closes and it becomes the world’s third largest chipmaker in revenue.
And initial comments indicate the combined company will maintain a sizable operation in Irvine, where
Broadcom broke ground on a five-building campus just two months ago, with plans for first-phase build out of 1.1 million square feet at Great Park and the potential for nearly twice the space.
“There are currently no changes to our plans” for the development of the campus, spokesperson Jen Baumgartner said last week.
Expected Cuts
Some cuts among the company’s 2,400 workers in Irvine and 11,000 companywide are expected over an 18-month period following the sale, which is expected to close in the first three months of 2016. The bulk of the layoffs are expected among sales, support and administrative staff, a familiar lineup for trims in the wake of acquisitions.
“Some of it will come very quickly—some it will come at the end of those 18 months,” Avago Chief Financial Officer Anthony Maslowski said.
Less likely will be deep cuts in engineering, the touchstone of Broadcom’s corporate culture.
Engineers account for about 75% of Broadcom’s employment base, and the two companies have complementary product lines—both factors that suggest cutbacks will be on the margins in OC.
“With Broadcom, we will add several new category leading franchises,” said Avago President and Chief Executive Hock Tan, who will continue to serve in those roles. “There is very little, if any, overlap of the products of the two companies, even though we have common strategic customers.”
They include Samsung, Cisco, HTC and Hewlett-Packard, which actually spun out Avago’s prior parent, Agilent Technologies Inc., in 2005.
Avago is a chip leader in radio frequency components, fiber optics, storage connectivity, and power amplifiers, among other technologies. Its smartphone offerings often sit next to Broadcom’s combo chips, which power Bluetooth, Wi-Fi, near-field communication and RF radio applications in some of the world’s most popular smartphones.
Record sales of the iPhone 6 and 6 Plus helped push Apple last year to the cusp of overtaking Samsung Electronics Co. as Broadcom’s largest customer. The company accounted for 14%, or roughly $1.16 billion, of Broadcom’s $8.43 billion in sales, according to Broadcom’s annual report.
Samsung accounted for 14.2% of Broadcom’s revenue.
Broadcom also specializes in broadband, infrastructure and networking technology.
The combined companies will have revenue of about $15 billion, behind Santa Clara-based Intel Corp., with $55.9 billion, and San Diego-based Qualcomm Corp., which posted sales of $27.5 billion in the last 12 months.
