says it cutting more than 500, or 16
percent, of its 3,067-person workforce.
The job cuts are part of an overall cost-reduction plan that aims to improve
the financial picture of the leading maker of semiconductors for cable
modems. Broadcom continues to face soft demand for some of its chip
products, and the company has been broadly affected by the prolonged slump
in demand from corporate telecommunications and networking companies.
Broadcom said last month it planned to cut jobs as part of its overall plan
to slice expenses by ten to twelve percent. Back in October, Broadcom CEO
Henry Nicholas trimmed the company’s fourth quarter sales forecast. Broadcom
has posted nine consecutive losing quarters. In mid-2000, Broadcom stock
hovered around $250 a share, today it is trading just below $20.
Back in 2000, Broadcom went on an acquisition spree buying Silicon Spice,
NewPort Communications and BlueSteel Networks for stock valued at more than
$2.5 billion. The bulk of the latest layoffs are said to have come from the
staffs of these three companies.
“Broadcom has not eliminated any of its product lines as a result of
workforce or cost reductions,” said Henry Nicholas, president and CEO of
Broadcom, in a company statement.
On Monday, Cody Acree, communications chip analyst at Legg Mason cut
Broadcom’s stock rating to “hold” from “buy.”
“While we are reducing our rating on Broadcom’s shares we are not changing
our views on the company’s solid fundamental position,” Acree said in his
Legg Mason Broadcom research report, released on Monday.
“With Broadcom’s shares now trading with a 4.3x forward price-to-sales ratio
versus its peer average ratio of 5.1x, we find it difficult to make a case
for aggressive purchase. With this, we are downgrading our rating on
Broadcom’s shares from Buy to Hold and are removing our price target,” Acree
said in the report.