RealTime IT News

Broadcom Opens New Front at Home

Some ISDEX companies are always in the news. Small coincidence: They're the hotter stocks with heavy volume, sharp upward swings and quick rebounds after market slumps.

Broadcom Corp. (Nasdaq:BRCM), less than a week after celebrating a strong second quarter with earnings of 19 cents a share, has a double shot of news. The stock is down almost 30 points in the last three weeks which can be attributed to over-heated expectations for the quarter and an overly cautious Alan Greenspan. However, shares have almost doubled since the start of the year.

Based on its aggressive track record, Broadcom looks like a safe bet for a quick recovery.

Last week, the company acquired the type of small innovative company that should be fueling its future growth. It bought HotHaus, a pioneer in the embedded digital signal processing (DSP) software. A lot of me-too companies do DSP but HotHaus' strong suit is telephony signaling for VoIP (Voice over Internet Protocol) that runs in gateways, cable modems, ADSL modems, and Internet appliances.

The $280 million acquisition fits in squarely with the company's current product lineup, filling a key gap. Broadcom is strong in chips that manage cable modems and DSL modems. Being able to plug voice over IP into those chips is both a defensive and an aggressive move.

For evidence of how acquisitions can help Broadcom, look no further than yesterday's joint announcement with Lucent to cooperate on development of 10 Mbps home networking products. This new line of products will control the intra-home networks that will emerge soon after cable and DSL penetration becomes stronger, allowing multi-PC families to share a single Internet connection in the first generation and to add-on network appliances in the next.

Broadcom is party to this deal because of its April acquisition of Epigram, which developed fast networks designed for in-home use over ordinary copper phone wires. Less than four months after making the deal, Broadcom is moving into a new market in partnership with telecom heavyweight Lucent.

Even more significant, the partnership is being endorsed by a standards-setting alliance, HomePNA, which hopes to control the products developed for the emerging home network market.

It's one thing to have good technology but the biggest threat to high-technology companies is complacency. Broadcom is acting like a fast-growing Internet company, using its stock to buy market share. That's a good way for BRCM to justify the heavy volume and long-term buying interest.


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