Broadcom Search for New Chief Stalls Over Founder’s Influence
By ANDREW SIMONS
Orange County Business Journal
Broadcom Corp.’s search for a new chief executive appears to be at a standstill.
Nearly a year since co-founder Henry Nicholas left amid corporate and family changes, the Irvine chipmaker is back at square one with its search for a replacement.
“We don’t have anybody,” Alan E. “Lanny” Ross, the interim chief executive who took over after Nicholas’ exit, told the Orange County Business Journal.
A search sticking point, according to sources: the large number of voting shares owned by Nicholas and co-founder Henry Samueli, Broadcom’s chairman and chief technical officer.
While Nicholas has been steadily selling Broadcom stock, the co-founders still control about two-thirds of the voting shares. Their dominance over the company could be a turnoff for some candidates.
On top of that, the interview process at Broadcom has been tough, sources said. In addition to all the normal evaluations, candidates are said to be meeting with Nicholas, even though he no longer has a board seat.
Sources said that at least one candidate went to Nicholas’ home and met with him into the early hours of the morning recalling the fast times of the late 1990s when a supercharged Nicholas would call workers into meetings at all hours.
Ross acknowledged that job candidates have met with Nicholas.
“He does own a good portion of the company,” Ross said.
Broadcom reportedly came close to hiring a new chief in September.
Ashok Kumar, an analyst with Minneapolis-based U.S. Bancorp Piper Jaffray, issued a report saying that Charles Giancarlo, a senior vice president with Cisco Systems Inc., was set to take the post.
The leak reportedly prompted Giancarlo to withdraw from consideration and made for an awkward situation with Broadcom courting an executive at one of its top customers. Several runners-up also were said to have pulled out after learning the search had honed in on Giancarlo.
Broadcom does have one prospect, according to sources familiar with the search: Ross himself. At 69, he has given mixed signals about taking the job on a long-term basis.
Ross, who used to run what became Newport Beach-based chipmaker Conexant Systems Inc., doesn’t use the “interim” chief executive title. There’s no such thing as an interim CEO, he says.
For now, Ross lives in executive housing in Irvine. His wife splits her time between Orange County and the couple’s home in Seattle. Earlier this year, Ross bought another house in La Quinta and a vacation retreat near Missoula, Mont.
Broadcom’s directors may be split on what to do, sources said. Some want Ross for the job; others like him but are partial to the idea of an up-and-comer leading Broadcom through a critical growth phase. A decision on how to proceed is possible in the first quarter, according to sources.
Analysts credit Ross with Broadcom’s turn of fortune this year. He has cut costs by disposing of two of Broadcom’s six business units and overhauling the company’s image from that of young, brash company to a more polished, mature one.
As part of the effort, an advertising campaign has been launched to boost its brand.
The company also has been blessed with bettering conditions for chipmakers as corporate buyers have started buying network gear, a key outlet for Broadcom chips.
In the third quarter, Broadcom posted an operating profit of $53.3 million, compared with a loss of $14.4 million for the like period a year earlier. That was on a 47 percent sales gain to $426 million. The turnabout has been noted on Wall Street with Broadcom’s stock up more than 190 percent since January.
With a market value of $10.9 billion, Broadcom also has become Orange County’s most valuable company again, surpassing Irvine-based drug maker Allergan Inc.
The stock gain has boosted Broadcom’s buying power. Earlier this year, Ross said Broadcom would be looking for acquisitions potentially large enough to double the size of the company. There’s been no word on the progress on a possible acquisition.
