RealTime IT News

Broadcom: Standing Room Only

Broadcom isn't looking for a slice of the semiconductor pie. The company has been slaving in the kitchen this year in an effort to establish itself as the Mrs. Smith of chipmakers. It's strategy is simple. Don't waste precious time in a fast moving industry organically building a smorgasbord of technology offerings. Buy them instead.

Since mid-summer of last year, Broadcom has collected an impressive collection of 13 acquisitions, with 8 coming just since the turn of the millennium. Last week, the company added Silicon Spice to its bulging portfolio in a $1.2 billion stock-swap, and network circuit manufacturer Altima Communications was welcomed into the fold back in July in a half billion dollar land-grab.

The latest inductee to join the high-growth club is privately-held NewPort Communications in a handsome $1.32 billion stock deal, or 5.5 million Broadcom shares. The upstart hit the jackpot with its foresight to fashion itself a fiber-optic network chip designer in the mid-90s. With today's capacity hungry consumers and investors, optical networking has recently come into its own.

For any apathetic armchair investors, here's the skinny on optical networking using a broad brush stroke. The technology works by sending data in the form of light pulses that piggyback on glass strands of optical fiber, manufactured by bellwethers like Lucent . The technology has been in use for years, but in the mid-90s a new twist on fiber caused its popularity to balloon. That new twist is called dense wavelength division multiplexing (DWDM), and here's why it's such a crowd pleaser.

DWDM makes it possible for telecoms to carry multiple frequencies of light on just a single fiber strand, meaning higher capacity on the existing infrastructure, eliminating much of the added costs associated with installing fatter pipes. The concept is similar to the digital subscriber line (DSL) outbreak that turned existing copper telephone lines into gold, by moving high-speed data across existing infrastructure.

Here's three reasons why optical networkers are hotter than a grease fire. PC chipmakers are doubling performance nearly every 18 months, while Web traffic is doubling roughly every nine months. Today, optical networking equipment performance is doubling every 10 months. That's helping capacity keep pace with booming traffic spurred in part by faster PCs, and naturally, individuals' insatiable demand for high-speed Internet access.

NewPort brings its low power crackerjack digital transceiver for use in optical networking to the table in this latest buyout, and Broadcom had only to cross the street to its old headquarters to arrive at NewPort's doorstep. After trying unsuccessfully to recruit its founders years earlier, Broadcom finally made an offer NewPort couldn't refuse.

This is a super deal for NewPort to strike while the iron's hot, and another thoughtful step in Broadcom's master consolidation plan to be the one-stop shop for chips used in communications networks. With the firm's stock on a moonshot, Broadcom is showing real smarts to swap its richly valued currency for high octane start-ups. If the music stops and investor enthusiasm should wane, smaller rivals will be scrambling for chairs while Broadcom will be sitting pretty with room to spare.

Any questions or comments, love letters or hate mail? As always, feel free to forward them to kblack@internet.com.

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