Broadcom to buy SiByte for $2.04 billion in stock, enter network processor arena

Broadcom confirms expected purchase of SiByte for $2.04 billion in stock
By Mark LaPedus, Semiconductor Business News
November 6, 2000 (3:03 p.m. EST)
URL: http://www.eetimes.com/story/OEG20001106S0034

IRVINE, Calif. -- In a bold move into the booming network-processor market, Broadcom Corp. here today announced its long-expected acquisition of communications chip maker SiByte Inc. for about $2.04 billion in stock.

The deal had been rumored and expected for weeks. As reported in SBN last October, (see Oct. 13 story), Broadcom had been in discussions with SiByte about acquiring the Santa Clara, Calif.-based chip maker. At the time, the companies did not comment.

With the acquisition of SiByte, based in Santa Clara, Calif., Broadcom gains a quick entry into the network-processor market. In October, SiByte introduced its first product--a line of data-packet chips based on RISC processors from Mips Technologies Inc. The chip is build around a dual-processor architecture based on a 64-bit RISC chip from Mips. (see Oct. 9 sto ry).

The deal with SiByte could also give Broadcom some inroads into one large OEM account--Cisco Systems Inc. The San Jose-based networking equipment giant is an investor and a customer of SiByte, the companies said.

And it also puts Broadcom in the booming competitive network-processor market against the likes of Applied Micro Circuits Corp., Conexant, Intel, Lucent, Motorola, PMC-Sierra, Vitesse, and several other suppliers.

"With the addition of SiByte technology, we will be armed with the world's fastest and lowest power MIPS industry-standard broadband processor technology," said Henry Nicholas III, president and chief executive of high-flying Broadcom of Irvine, Calif.

The alliance between SiByte and Broadcom makes sense, analysts said. The companies, which do not compete against each other's markets, both are RISC chip licensees of Mips Technologies, analysts said. Last year, Broadcom rolled out a gateway-on-a-chip line that combines a cable-modem IC, a RISC processor from Mips, and other components on the same device, they added.

The deal with SiBtye--Broadcom's 15th major acquisition since mid-1999--will expand the company's high-end chip offerings. Before it went on its acquisition spree last year, Broadcom was primarily known as a supplier of chips for lower-end Layer 1 and 2 applications, such as cable-modem chips, transceivers, set-top-box devices, and switching ICs.

Then, in 1999, Broadcom began to grow the company via acquisition. At the high-end of the market, for example, it jumped into the switch-chip market for Layer 3 applications by acquiring Maverick Networks, a little-know IC design house.

In October of 2000, it acquired Silicon Spice, a supplier of high-end telephony chips for over $1 billion. At about the same time, Broadcom purchased NewPort Communications, a supplier of high-end transceiver chips for SONET networks. And last month, Broadcom acquired Allayer Communications, a supplier of switching chips for 10-gigabit-per-second networks.

Under t he terms, Broadcom will issue in aggregate up to 9.3 million shares of its Class A common stock in exchange for all outstanding shares of SiByte's stock. About 5.6 million of the Broadcom shares will be issuable at closing of the acquisition. Approximately 3.7 million additional shares will be reserved for future issuance to the stockholders and option holders of SiByte upon satisfaction of certain performance goals.

The merger transaction is expected to close within 60 days.