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Broadcom Acquires Software Firm

In a move to boost the capacity and speed of broadband offerings, high-speed chipmaker Broadcom Corp. Tuesday bought software firm Digital Furnace Corp. for $136 million in stock.

Broadcom (BRCM) will issue 664,735 shares of its Class B common stock and reserve 85,265 additional shares of its Class B common stock for all Digital Furnace equity.

Broadcom's interest in the company stems from Digital Furnace's core technology Propane -- a patent-pending software solution that runs on Broadcom's chip sets. Propane improves efficiency and reduces latency in broadband networks, allowing Web pages to load much faster.

Broadband cable operators are moving aggressively to introduce services to the fast-growing Internet access and telephony markets. According to Forrester Research, Inc., 26 million households will have Internet access via cable modems by 2005, and 20 percent of U.S. households will have telephone service via cable-connected phones. This is where the high-flying software of Digital Furnace arrives as Propane provides cable operators with a tool that can increase this reverse-path capacity up to three times.

"High-speed Internet access, multiple telephony lines, computer networking, security and videoconferencing all create higher and higher demand for network capacity," said John Lappington, Digital Furnace's chief executive officer, president and co-founder. With the added capacity provided by Propane, cable operators deploying Broadcom-based communications equipment can now greatly increase their number of interactive customers and resulting service revenue over existing broadband networks."

The operations and employees of Digital Furnace will be integrated with those of Broadcom's Residential Broadband Business Unit, based in Atlanta.

Last January, Broadcom snagged BlueSteel Networks, a developer of Internet security processors, for $110 million. Broadcom inked the deal to integrate security and encryption features into its chips.