Broadcom Acquisition of Broadlight Bolsters Product Portfolio

by Trefis Team
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Broadcom (NASDAQ:BRCM), a provider of semiconductor solutions for wired and wireless technology, announced that its $195 million acquisition for BroadLight closed in April. The year 2012 started on a good note with the acquisition of NetLogic which will give a push to its infrastructure & network business, and the 5G Wi-Fi solutions will gear it up to face competition from Qualcomm (NASDAQ:QCOM). Additionally, with the acquisition of BroadLight, Broadcom is now well positioned to offer service providers complete solutions across the access spectrum from DSL to cable to PON. Broadcom also faces competition from other semiconductor companies such as Nvidia (NASDAQ:NVDA), Texas Instruments (NASDAQ:TXN) and Marvell Technologies (NASDAQ:MRVL).

Acquisition of BroadLight will Add PON Products to its Portfolio

BroadLight is a provider of integrated networking and fiber access PON (Passive Optical Network) processors. It is the technology and market leader in BPON and its successor GPON (Gigabit Passive Optical Network). Its products include GPON gateway processors and controllers for carrier-switching equipment. Recently, BroadLight proliferated its product line with embedded processors based on the NPU technology developed for its GPON products. [1]

The acquisition enables Broadcom to offer a complete, end-to-end GPON solution to its customers, from the optical line terminal (OLT) at the central office to the optical network unit (ONU) at home. Broadcom believes that PON is a fast-growing segment with subscriber base growth forecast to be above 20% per year.

The BroadLight portfolio combined with Broadcom’s networking and management software, home networking portfolio and VoIP expertise will offer customers a complete portfolio of wireline access products. [2]

The home entertainment and broadband segment contributes roughly 17% to our price estimate. Currently, Broadcom’s market share is 30.7% which we expect to grow marginally to 31.6% in 2012, and then stabilize thereon. However, if the market share reaches 40% by the end of our forecast period, there could be a slight upside to our price estimate.

In Q1, Broadcom introduced its latest generation of entry-level cable set-top box platforms to fuel global migration to HD and announced several partnerships in China to deploy Ethernet over Coax. Additionally, we saw Broadcom meaningfully expand its footprint in the service provider market by announcing powerful new products, including the world’s highest density scalable 100-Gigabit Ethernet switching solution and next-generation high-performance stackable enterprise switches, among others.

Keeping in mind the record design wins in Q1 across all three segments, we believe Broadcom’s product competitiveness is higher than it has ever been and remain optimistic on the future performance of the company.

Understand How a Company’s Products Impact its Stock Price at Trefis

which faces competition from semiconductor companies like Qualcomm (NASDAQ:QCOM), Nvidia (NASDAQ:NVDA), Texas Instruments (NASDAQ:TXN) and Marvell technologies (NASDAQ:MRVL), announced its Q1 2012 result on Tuesday. With acquisition of NetLogic complete, the quarter posted revenue of $1.83 billion. Though, excluding the NetLogic revenue the company saw a marginal decline in its result, we believe it is more on account of the industry slowdown and the overall prospects of the company look good to support a double digit growth in 2012. Here we point out certain factors that had an impact on Q1 performance as well as trends likely to influence the future outlook of the company.

Notes:
  1. Broadcom Acquires BroadLight, Linley Wire, April 10, 2012 []
  2. Broadcom acquires BroadLight, Session Border Controller, April 6, 2012 []
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