Irvine’s Broadcom to Buy AltoCom for $170 Million
Broadcom Corp., the Irvine semiconductor powerhouse that has been on a buying spree, said Wednesday it agreed to acquire privately held AltoCom Inc., which makes software that acts as a computer modem, for about $170 million in stock.
Broadcom said it will issue about 1.62 million shares of its Class B stock for AltoCom, a 17-person software developer based in Mountain View. AltoCom’s software, called SoftModem, eliminates the need for computer modem chips in fax machines, personal computers and home-networking devices.
The deal, which is expected to close in about a month, would allow Broadcom to expand its home-networking technology. In its initial foray into the burgeoning home-network arena this spring, Broadcom bought Epigram Inc. this spring for $316 million in stock.
Earlier this month, the Home Phoneline Networking Alliance agreed to accept a technology standard, developed by Epigram, that lets data run over home phone lines at 10 times the speed of the current standard and not interfere with existing services.
Broadcom will be able to charge a licensing fee to other chip makers that want to use the technology. But the bulk of Broadcom’s profits, say analysts, will come from the sale of these chip sets.
Now, Broadcom plans to add AltoCom’s technology to this mix. Analysts say Broadcom will use AltoCom’s software in products that let computer users browse the Internet and share information over existing phone lines.
“What the AltoCom deal does is give Broadcom the technology to create an all-in-one modem and home-networking solution for computer manufacturers,” said Karuna Uppal, a senior analyst with the Boston-based research firm, the Yankee Group. “If I’m a company like [PC maker] Dell [Computer Corp.], I’m going to want my computer to have a modem built into it. And I’m going to want my computer to be able to be hooked up to a home network.
“Normally, that would take two [devices]. But Broadcom is going to be able to create products that will do both things, but in one [device],” she said.
This would be the fifth acquisition since the start of the year for Broadcom, whose stock price has skyrocketed more than ninefold since it went public in April 1998. The gains come at a time when there is booming demand among consumers for the chips used in high-speed office networks and cable modems.
On Wednesday, the stock rose $6.63 a share to $111.50.
Broadcom, which had $203.1 million in revenue last year, said it expects to take a third-quarter charge to cover acquisition-related expenses.
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Broadcom Buys, Buys, Buys
Broadcom’s stock price has boomed ninefold since the company went public in April 1998, thanks to demand for chips used in high-speed office networks and cable modems. The result? A corporate buying spree.
Date: Aug. 11
Company: AltoCom Inc.
Location: Mountain View
Price: $170 million in stock
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Date: July 18
Company: HotHaus Technologies
Location: Vancouver, Canada
Price: $280 million in stock
*
Date: June 1
Company: Armedia
Location: Milpitas
Price: $67.2 million in stock
*
Date: April 25
Company: Epigram Inc.
Location: Sunnyvale
Price: $ 316 million in stock
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Date: Jan. 25
Company: Maverick Networks
Location: San Jose
Price: $ 104 million in stock
Source: Times reports
