While Los Angeles has seen an increasing volume of broadband activity, much of the action is taking place in Orange County. And by far the largest participant there is Broadcom Corp., the Irvine-based chip maker that as of last week (even after a recent share-price retreat) had a market value of about $10 billion.
Broadcom designs chips for a variety of high-speed communications uses set-top boxes, cable modems, digital subscriber lines, satellite transmission and high-speed networking.
The company made a splash with an $80 million initial public offering in April 1998, followed by a share-price run-up that made co-founders Henry Samueli and Henry Nicholas into paper billionaires. (The pair met when Samueli, a UCLA professor since 1985, served as an advisor to Nicholas, who at that time was pursuing a Ph.D. in electrical engineering.)
After posting a net loss of $1.2 million in 1997, Broadcom shot into the black in 1998 with $36 million in net income. Revenues rose even more sharply, from $37 million in 1997 to $203 million in 1998.
That growth is continuing this year. In fact, Broadcom’s acquisition activity has been torrid as it races to realize a “larger strategy to provide end-to-end broadband connectivity,” Nicholas said.
This year alone, its acquisitions have included a $300 million purchase of Sunnyvale-based home networking technology company Epigram Inc., a $100 million deal for San Jose-based data network specialist Maverick Networks and last month’s $280 million pickup of Vancouver, B.C.-based HotHaus Technologies Inc., a maker of embedded communications software specializing in voice-over-Internet applications.
The strategy paid off on one front last month, when technology developed by Epigram and Lucent Technologies was selected by an industry group as the standard for the next generation of home networking.
Red Herring, a tech-industry trade magazine, named Broadcom one of its 50 top public firms and put “the Henrys,” as the co-founders are known locally, among its top 20 “Cyber Elite” entrepreneurs.
While built without venture capital money, Broadcom has strategic investments from industry giants Intel Corp., Cisco Systems, General Instrument and Scientific-Atlanta.
A budding Orange County rival of Broadcom is Conexant Systems Inc. of Newport Beach. Formerly known as Rockwell Semiconductor, it was spun off from parent Rockwell International in January and instantly became the world’s largest semiconductor manufacturer devoted solely to communications.
Although Conexant still derives most of its revenue from analog modem chips, the $1.2 billion-a-year firm has begun moving into chips for cable set-top boxes.
The same competition that is opening up opportunities for Conexant, however, is also causing problems for others.
PairGain Technologies Inc., a Tustin-based broadband company, has seen its dominance of the HDSL chip market evaporate amid increased competition. (Samueli helped build PairGain before moving on to form Broadcom with Nicholas.)
Other Orange County firms in the broadband market include Nextlink California, a Santa Ana-based unit of Bellvue, Wash.-based Nextlink Communications, which has a 260-mile fiber-optic loop through L.A. and Orange counties. Nextlink is using Orange County as a test market for completing the so-called “last mile” connections between individual customers and the fiber-optic backbone.
And NewPort Communications of Irvine founded by two former Rockwell Semiconductor engineers plans to introduce its first chip for the wide-area networking market by the end of September.
