Broadcom to Buy BroadLight, Expand Fiber Access Portfolio

Broadcom takes another step in growing its networking capabilities with its $195 million purchase of BroadLight, a month after closing its $3.7 billion deal for NetLogic.

Broadcom is buying BroadLight in a move designed to enhance its broadband access portfolio by adding BroadLight€™s passive optical network (PON) processors.

In the deal, announced March 21, Broadcom officials said they will pay $195 million in cash for the 12-year-old BroadLight, and could pay an additional $10 million if certain performance goals are met.

Broadcom, a semiconductor vendor, said the addition of BroadLight and its integrated networking and fiber access PON chips will enable Broadcom to better meet customer demands related to next-generation fiber networks worldwide. Such networks are required to meet the rising need for more bandwidth as the demand for such applications as high-speed Internet and high-definition TV grows, according to Dan Marotta, executive vice president and general manager of Broadcom's Broadband Communications Group.

"The need for increased bandwidth for IPTV services, HDTV broadcasting and high-speed Internet access are driving momentum for deploying fiber networks," Marotta said in a statement. €œCombining BroadLight's PON solutions with the strength of Broadcom's broadband access portfolio will enable us to offer a complete, end-to-end solution for customers€”from OLT [optical line terminal] at the central office to CPE [customer-provided equipment] at the home. BroadLight's strong engineering team and broad IP will complement and extend our ability to deliver next-generation access technologies to customers."

Broadcom officials expect the deal to close in the second quarter.

The deal comes as Broadcom, whose chips run in mobile devices like smartphones and tablets and in TV set-top boxes, looks to aggressively grow its capabilities in the networking space. The vendor last month closed its $3.7 billion deal for network chip maker NetLogic Microsystems, whose low-power processors featured built-in network intelligence.

Ross Seymore, managing director of U.S. semiconductor research for Deutsche Bank Securities, said in a note that BroadLight was €œanother strategic tuck-in deal€ for Broadcom.

€œSimilar to [Broadcom€™s] other recent smaller acquisitions €¦ this deal appears to fall in-line with [Broadcom€™s] strategy to acquire private semi companies with specific technologies that should drive further customer penetration of the company's product portfolio into emerging, potentially high growth end markets,€ Seymore wrote. €œWe believe this acquisition complements [Broadcom€™s] strong position as a provider of chips and software used in business and residential gateways as well as TV set-top boxes, specifically in the PON space that should experience fast subscriber growth globally in coming years.€

In January, Broadcom executives announced that the company saw revenues in the fourth quarter 2011 drop 6.4 percent€”to $1.82 billion€”from the same period in 2010. Income fell from $266 million in the fourth quarter of 2010 to $254 million in the same period last year.

For all of 2011, Broadcom earned $927 million€”down from $1.08 billion in 2010€”on revenues of $7.39 billion, an 8.4 percent jump from $6.82 billion in 2010.