It’s a bit of an understatement to say Broadcom Corp. Chief Executive Scott McGregor is leaving on a high note.
He presided over the $37 billion sale to Avago Technologies Ltd. in Singapore in one of his final challenges at the helm of the Irvine-based chipmaker. The deal, which is expected to close soon, briefly held the designation as the highest in tech history before Dell Inc. announced a $67 billion takeover of data center builder and business software maker EMC Corp. in October.
“Today marks the next chapter in Broadcom’s incredible history—a landmark transaction with Avago that creates the industry’s third largest semiconductor company,” McGregor said in a May 28 email to employees.
The blockbuster sale and his efforts to position the company for such a field-clearing price tag earned McGregor the Business Person of the Year honors in the tech sector (see related stories, pages 1, 4, 6, 8 and 12).
The combined company—which will be named Broadcom Ltd. and shift its headquarters to San Jose—has annual revenue of about $15 billion and leadership positions in communication chips, power amplifiers, broadband, set-top boxes, and data center and networking connectivity.
Avago’s smartphone offerings often sit next to Broadcom’s combo chips on the device’s motherboard.
Avago President and Chief Executive Hock Tan will take the reins of Broadcom’s operations from McGregor, who will leave the company and receive a $67 million severance package.
Growth
Broadcom grew revenue from just over $2.5 billion to a record $8.4 billion during McGregor’s 10-year run as chief executive, with $1.4 billion in adjusted profits last year. The company’s market value grew more than sixfold over the same period to around $35.5 billion as 2015 neared an end.
Much of the growth has been linked to relationships Broadcom has fostered with smartphone rivals Apple Inc. and Samsung Electronics Co.—its two largest customers.
The Cupertino-based iPhone and iPad maker accounted for 14%, or roughly $1.16 billion, of Broadcom’s sales in 2014, up from 13.3% in 2013, according to Broadcom’s annual report.
Broadcom had a chip in the popular iPhone 6 and Apple’s phablet model that powered touch functions and was believed to have supplied all of the Wi-Fi networking specs of a pricey chip in the smartphones branded under Kyoto, Japan-based Murata Manufacturing Co., according to FBR & Co. analyst Christopher Rolland.
South Korea-based Samsung, the world’s largest consumer electronics manufacturer, accounted for 14.2% of Broadcom’s revenue in 2014, or roughly $1.2 billion.
Apple was Broadcom’s largest customer in 2010 and 2011 before Samsung grabbed the designation in 2012.
Broadcom expanded operations under McGregor’s watch from 13 countries in 2005 to 26 as the company’s U.S. and foreign patents and applications jumped from 4,800 to more than 20,650.
Internet of Things
McGregor also steered the company to the booming Internet of Things market as he sought emerging growth segments, rounding up a new crop of customers last year made up of hot startups.
The strategic shift has helped the chipmaker amass a mix of smaller customers that range from makers of portable breathalyzers and wireless grilling thermometers to manufacturers of mini drones and smart guitars.
“We’re going to enable more and more of that,” McGregor told the Business Journal last year. “We’re really just helping to create an overall innovation wave.”
Global sales of components and equipment that power the Internet of Things market will explode to $7.1 trillion by 2020, up 273% over 2013, according to Massachusetts-based market researcher International Data Corp.
Morgan Stanley estimates that about 75 billion products, such as washing machines, lighting systems and body health sensors, will be connected to the Internet by then.
Broadcom enters the new year amid construction of a five-building campus next to Orange County Great Park that calls for 1.1 million square feet in its first phase, marking another new chapter in the company’s history—which will now proceed under new ownership but the same Broadcom brand.
