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Broadcom Scoops Up SiByte for $2 Billion

In a pure networking play, Broadcom Corp. Monday bought chipmaker SiByte Inc. for $2.07 billion.

The silicon solutions provider for broadband communications, nabbed SiByte for its high-performance network processors, which it hopes will complement Broadcom's Internet Protocol (IP) switches, communications DigitalSignal Processors, IP security solutions and physical layer transmission products.

Once integrated with Broadcom, SiByte's products will provide the processing required to move data at ultra-fast rates ranging from 1.0 Gigabit-per-second (Gbps) to 40 Gbps (OC-768). The firm's solutions will be targeted for high-speed Local Area Networks, Metropolitan Area Networks, Wide Area Networks, Voice over Internet Protocol gateways, optical networking and wireless communications.

For a firm like Broadcom, it is imperative that it focuses on the migration of packet-based architectures from the much slower circuit-based connections for its routers and switches.

The key to SiByte's success is its Mercurian® suite -- processors solutions designed specifically to meet the needs of next-generation networks.

Dr. Henry T. Nicholas III, president and chief executive officer of Broadcom, said his firm would be adding Dan Dobberpuhl, SiByte's president and CEO, to its senior management and technical team.

Broadcom has been busy in the past year, having grabbed Allayer Communications for $273.5 million in stock and the U.K.'s Element 14 for $594.3 million in October among its 15 acquisitions since January 1999.

Yankee Group analyst Jay Patel said Broadcom has undergone quite an evolution -- from developing cable-modem chips in 1997 to branching out to cater to DSL, local-area network, wide-area network , metropolitan-area network and wireless arenas.

Patel said the firm can consider itself among the leaders in semiconductor solutions.

"With its enviable growth rate and foray into various communications markets, Broadcom is becoming a formidable competitor to specialty companies such as PMC-Sierra and Vitesse Semiconductor as well as semiconductor titans such as Intel and Motorola," Patel said.

Broadcom will issue in aggregate up to 9.3 million shares of common stock in exchange for all outstanding shares of SiByte's preferred and common stock and upon exercise of outstanding employee stock options and other rights of SiByte. The deal is expected to close in two months.

As for SiByte, a leading provider of silicon products for fast data, voice and video in next-generation networking systems, Cisco recognized the qualities of the firm in May by joining in a $40 million investment round with four other firms.

Cisco was also busy itself Monday. The networking expert pumped $150 million into communications operator Cambrian Communications. Cisco is trying to catch up to Lucent and Nortel Networks in the optical networking arena.