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Henry Nicholas: Broadcom's visionary 'bad cop' founder

The rock band Orgy is late. Even worse, the singer's porn-star date and her friends may not make the party--a definite blow to the coolness factor. In the meantime, tattooed roadies are tracking dirt across the clean, creamy marble floors of the house.

The 40-year-old birthday boy, technology multi-billionaire Henry T. Nicholas III, is perturbed.

"Christ almighty, will this [expletive] home network stop crashing?" Nicholas shouts at construction workers who are scurrying to pull everything together before the first guest arrives. "The [expletive] technology, it better [expletive] work in my house."

Nicholas' Laguna Hills mansion, 15,000 square feet on an acre with a godlike view of Orange County, houses more than $1 million worth of computers and 27 miles of cable stretching like veins through its walls. The two-story palace, with its vaulted ceilings and hidden doors that Nicholas opens with secret levers, is the home every computer geek dreams about. Everything here--the pop stars, the girls, the complex computer system that regulates such relatively simple tasks as making coffee--is meant to showcase the power and promise of Broadcom Corp., Nicholas' company in Irvine, and of Nicholas himself.

Broadcom makes little, unheralded pieces of the technological revolution--communication chips. But they are pieces that analysts predict will be installed one day in a billion interconnected devices. Every computer. Every television. Every telephone. Every coffee maker. * Even now, these machines are being tied together and are starting to talk to each other. Point a remote at the TV to watch sports or surf the Web. Use a cell phone to send e-mail or play a video game. Tap the keys on a PC at work to take a "virtual" meeting, watch the latest Keanu Reeves movie or turn on your hot tub at home.

This is the wired future, a seamless global network of computers and instant access to information. Intel may own the heart of this revolution (the microprocessing chip) and Microsoft its brain (the software). But the pieces that tie together all the machines that touch your life--these are the chips made by Broadcom, chips that have brought astonishing fame and fortune (more than $4 billion apiece at last count) to Nicholas and his partner, chief technical officer Henry Samueli.

The heady stock market of recent years has spawned scores of business leaders like Nicholas who, despite his temper tantrums, has his charms. These executives market not only their company but themselves as well. They are a human face for the machine, the sex appeal creating sizzle for boring objects or esoteric ideas.

While past executives of the computing industry have been gray administrators, many of today's top players are young, physically and financially. They enjoy the curiosity of a public fascinated by their wealth and strange quirks. They indulge in childish excesses at a time when glory and groupies go to those with big dreams and even bigger egos. They have transcended the stodgy business world and stepped into the pop limelight. Like Microsoft's Bill Gates or Apple Computer's Steve Jobs, Nicholas can play the gregarious media star because Broadcom makes something we soon won't be able to live without. To make a great chip--a chip that will change the way people communicate--is to be thrust to the same level of cultural importance as a rock god.

"There are the rules for Nick and there are the rules for everyone else," says a Broadcom customer who requested anonymity out of "fear of Nick and what he'd do to me.

"[Nicholas] works hard. He parties hard. He does everything to the extreme."

Fame, money, envy among the techno-business elite--Broadcom employees enjoy all this because of Henry T. Nicholas. Without him, the company would never exist. Samueli understands this. He also knows that as Broadcom succeeds, his business partner becomes more mercurial.

"Nick's gained more confidence to be more brash, no question," Samueli says. "People accept it. We all accept it."

Yet there are things that even tech-stars can't control: At 4 p.m., hours before the first martini is poured at his birthday party, the cops already have shown up to chastise Nicholas about the noise.


To understand why Nicholas and Samueli are celebrities in the business world--why they're more than just the latest techno-rich media darlings--you have to understand how computers and the people who build them became so hot.

Early waves of the cyber-elite, the Gates and Jobs of the world, understood in the late 1970s that a revolution would come from the guts of beige boxes.

By the 1990s, the revolution had evolved into its second stage, the Internet boom. Millions of wires buried deep inside the earth, linked to millions of computers, all linking millions of people. Then things changed. People stopped buying as many new PCs because they couldn't justify spending $1,800 on a new machine every 18 months just to have a bigger, stronger box. PC prices rapidly declined, to the point where machines sometimes were given away.

The second stage gave way to a third, in which the moving of information became more important than processing the information. The future isn't about making computers more powerful; it's in expanding the clogged arteries of the networks that send and receive large amounts of data.

This is the wave that Nicholas and Samueli are riding.

The Broadcom strategy is based on their vision of people wanting information, gobs of it, to flood in and out of their lives. That information could be related to work (e-mail, spreadsheets), fun (music, movies, shopping) or a combination of both.

The market is small but exploding. Ten million homes in the United States are expected to have computers that share a network connection by 2003, according to the Yankee Group, an industry analyst firm.

The race to control the key elements of this networked future is just beginning. And Broadcom, for the most part, is in the lead and on a pace to top $500 million in annual sales in only its second year as a public company, a first among chip companies.

Engineers and investors in Silicon Valley began buzzing in the mid-1990s about Nicholas and Samueli and their dream of turning a relatively unknown venture into a computer powerhouse, bigger than Intel in the communications sector.

"We never took Southern California tech companies seriously because they always tanked," says Broadcom engineering director James L. Mannos, who was vice president of engineering at Maverick Networks in San Jose when Broadcom acquired it last year. "Even before I was at Maverick, I knew about Broadcom. It was the first [one] that everyone took seriously. They're serious."

Soon rivals started floating offers to buy the small company in Orange County, to acquire its technology and engineering talent.

Twenty million dollars. Forty million. Ninety million. Hundreds of millions.

"The last offer before they took the company public was $900 million," says Roland Van der Meer, a venture capitalist with ComVentures in Palo Alto, who made a personal investment in Broadcom during the company's infancy. "Nick just said 'no thanks.' Few people have the guts to walk away from that kind of money. But it's a trivial amount now, considering what happened next."

Broadcom debuted on the Nasdaq national market in the spring of 1998 at $24 a share. Since Broadcom had passed on several venture capital offers and boot-strapped itself, the company and its staff owned the vast chunk.

When the closing bell rang and the final trading slips fell to the floor on April 16, 1998, Broadcom's stock was worth $53.63 a share. More than 220 of the 300 employees at the time were millionaires. And two men became local celebrities.

Shopping ensued. Samueli, 45, bought a house in Corona del Mar for himself and his wife and toys for their three kids, ages 14 and under. He bought a 1999 maroon-colored Porsche Boxster for one of his employees but kept driving the same worn leased Cadillac.

Nicholas picked up a big, butch Harley-Davidson. A gleaming red Ferrari. A black Lamborghini that growls, even in first gear.

He didn't buy a plane. He bought a charter airline company with three jets and one helicopter: Prestige Aviation Services in Las Vegas. He and Samueli even made a bid to buy a minority chunk of the Angels and the Mighty Ducks from the Walt Disney Co.

Then there's the Nicholas family estate, with its waterfalls, two pools, underground grotto, expansive wine cellar and secret passageway that leads to the 2,000-square-foot sports bar he's building on the edge of his property.

A married father of three, ages 6 and younger, Nicholas says he's "not a rock star.

"I just have all their toys."

So do many of the Broadcom employees, whose spending habits have turned the company parking lot into a sports car showroom. Merchants and charities pepper Broadcom operators daily with pleas for engineers' direct phone numbers. When a new employee recently joined the corporate PR team, the manager at her local bank sent a bouquet of flowers and a congratulatory note: "We look forward to working with you in the future."

Like other technology moguls who are shedding their reputations for stinginess and beginning to approach civic duty with the same spirit that made them billionaires, the Broadcom duo is starting to spread the wealth. Samueli and his wife, Susan, gave a total of $50 million to the UCLA and UC Irvine schools of engineering in late December. In exchange for the gifts, the highly ranked UCLA School of Engineering and Applied Science and UCI's School of Engineering will bear Samueli's name. Both schools will offer Samueli scholarships to undergraduates, Samueli fellowships for graduate students and endowed Samueli chairs to perhaps a dozen of the most promising faculty.

For Nicholas and his wife, Stacey, philanthropy is serious business, too. The couple gave $1.3 million to South Coast Repertory, an undisclosed amount to the Orange County Performing Arts Center and $26 million to various charities in 1999.


In the Broadcom world, there is no such thing as playing nice. Not even with the revered gods of technology.

The biggest names in the computer world gather every fall at the plush Resort at Squaw Creek in Lake Tahoe for the Telecosm conference. Here they sip martinis, eat sauce-heavy meals and create the future.

Henry Nicholas--who routinely chomps on MET-Rx nutrition bars instead of real food--sits on a panel and ponders a question: How many people have to own high-speed modems before they become "mass market"?

It's a yawner of a conversation--until a reporter challenges the Broadcom CEO. The writer notes that Bob Metcalfe, one of the founders of the Net, believes a technology must be in 80% of the market before it is seen as mainstream. Not 40%, as Nicholas claims.

Nicholas rolls his eyes and snips, "Bob Metcalfe should know that's bulls---."

The crowd, as one, gasps. If Leonardo DiCaprio had dismissed Paul Newman as a talentless hack, the outrage would have been less. No one insults Metcalfe--father of 3Com Corp., prolific author with political connections, a true digerati, for God's sake. How dare Nicholas say that? Who is this Broadcom punk?

After the session, dozens of people from the audience surround Nicholas, peppering him with questions for another hour.

"Nick does what he can to be disliked," says Zaki Rakib, a co-panelist and CEO of Terayon Communication Systems. "He doesn't need to speak so arrogantly, but he does. He's like Muhammad Ali or Michael Jordan. He has that same inner conviction that he's going to succeed. That's why he's worth $4 billion and I'm only worth $100 million."

Not surprisingly, many of Broadcom's rivals don't like Nicholas. When interviewed, competitors, all of whom describe Samueli in glowing terms, call Nicholas everything from "an idiot" to "the antichrist."

The man's competitiveness is well known at Conexant Systems Inc., a key rival based just a few miles away from Broadcom's headquarters. The two companies jockey for position in the semiconductor world and in the market for chips that connect computers and televisions to the Net.

If Broadcom is a wild ride, Conexant is a safe hedge. The future is fabulous and convergence is great, but someone still needs to make all the chips for the modems and cell phones that people use today. Spun from the aerospace world of Rockwell International Corp., Conexant is a far less sexy company than Broadcom. If Nicholas is Mick Jagger, then Conexant chairman and CEO Dwight Decker is Yanni.

Talking about Broadcom makes the normally affable Decker an extremely annoyed, tense man. Teeth clenched, Decker growls that Nicholas "may not admit that we're competition, but we are."

So are others. While Broadcom was basking in Wall Street's limelight, Intel--whose annual sales are more than 50 times larger--spent $6 billion buying nine companies last year and became one of Broadcom's biggest competitors.

"Everything Intel has been doing these days has been gunning for Broadcom," says Allen Leibovitch, program manager for the semiconductor group at the research firm International Data Corp. "It's been a quiet push. But going forward, there's going to be healthy competition."

Rivalry, however, drives Broadcom employees. Any edge is important. So is keeping the customer happy. Broadcom doesn't send out press releases about partying with some of its customers but neither are these exploits state secrets. Nicholas isn't shy about regaling visitors with tales of taking "friends" to the VIP room at the House of Blues in Las Vegas and drinking them "under the table. . . . If you know how the body metabolized alcohol, you can win any drinking game."

Nicholas doesn't name names and, understandably, Broadcom's largest customers won't talk about bar tabs. Such conversations are meant to tease the listener, not embarrass the customer. They are meant to give a sense that these are wild times in the technology world and that Broadcom is speeding down the fast lane.

"I get what I want," Nicholas says, "because I always want to win."

Henry Nicholas was born in Cincinnati, Ohio, the son of a "brilliant attorney who was an alcoholic. [My father] used to be fairly abusive to my mother." One day, she had had enough. Although she was facing a continually dwindling bank account, Henry's mother, Marcella, finally packed her husband Tom's bags and told him to get out.

Henry, then 4, was playing with his toys in the front room. Marcella begged Tom to leave through the kitchen.

"He wouldn't," remembers Marcella, 70. "He walked out the front door. I remember Nicky running after him crying, 'Daddy, daddy, where are you going?' "

Friends helped Marcella and the kids--storing furniture, helping with food, offering comfort. Finally, armed with $5,000 in academic grant money, Marcella left her job as a school administrator, packed Henry, his younger sister and the family's few belongings into a U-Haul trailer and left for California.

Tom died of cancer in 1985.

Marcella enrolled in graduate school at UCLA and studied journalism. She eventually remarried, and the family moved to a small house in Malibu. It was the late '60s; Nicholas was growing up amid tie-dyed fashion and Joan Baez tunes, with little money but lots of love. Nicholas credits his stepfather, a screenwriter named Robert Leach, with nurturing his passion for science by helping him set up his first real chemistry lab.

The need to grab attention--not approval--blossomed for the headstrong boy who, by sixth grade, already was taller than the school principal. Even in seventh grade, Nicholas was looking to a future in science: For a school assignment, the young boy wrote: "If I had a job as a nuclear physicist, I wouldn't get as much as Howard Hughes, but I would get enough to support an average family of six."

Time passed. Rebellion meant becoming a Republican and, after graduating from Santa Monica High School in 1977, enrolling at the United States Air Force Academy.

"They wouldn't let me fly [fighter jets]. Too tall," says the 6-foot-6 Nicholas. "I left and got my degrees at UCLA. It's the one time in my life I feel that I failed."

An unusual concession from a man known for his arrogance and ego. And that's where the Zen-like Henry Samueli comes in, the rabbi to Nicholas' rock star.

Samueli, by all accounts, is off-the-charts smart, the kind of kid who skips part of two grades--6th and 8th--and usually gets bullied or beaten up for it.

"He's one of those naturally brilliant kind of guys who are impossible to hate," says William Kaiser, chairman of the electrical engineering department at UCLA. "He's just too calm to be threatening. You can't even dislike him a little."

His parents, Aron and Sala Samueli, both Jewish immigrants from Poland, moved to Buffalo in 1950 and some time later came to Los Angeles.

Samueli graduated from Fairfax High School at 16 and earned his undergraduate electrical engineering degree from UCLA at 20. He received his PhD from UCLA just before he turned 26, joined TRW Inc. and met Nicholas, who had earned his bachelor of science and master's at UCLA and then joined the working world.

For much of their friendship, Samueli has provided Nicholas' career opportunities. When Samueli took a huge pay cut to leave TRW and join the electrical engineering faculty at UCLA in 1985, he persuaded Nicholas to become his first PhD student.

Then, in 1988, Samueli picked up a part-time consulting job at PairGain Technologies Inc., then based in Cerritos. The company was struggling financially. It was years before the word "Internet" would enter the mainstream consciousness and long before it was sexy to be an engineer.

Samueli talked Nicholas into joining PairGain as the manager of an integrated circuits team. Nicholas started working on a technology called high-bit-rate digital subscriber line, or HDSL. Faster than traditional telephone modems, HDSL squeezes digital information over ordinary copper phone lines.

It was cheap. It made PairGain millions and millions of dollars. But over time, Nicholas wanted to begin developing a broader line of technologies and pushed to make his team a separate PairGain unit. PairGain's board of directors refused to fund such a venture.

Nicholas, with his hyper-aggressive management style, and PairGain, with its slower-paced corporate culture, came to a philosophical standoff that ended unpleasantly.

He was reprimanded "for doing outside work," says a source who worked at the company. "He had other interests and he started to pursue them on PairGain's time. Whether they were part of PairGain's agenda or his engineers' agenda, it didn't matter."

Nicholas agrees: "Henry begged me to play nice with PairGain. I couldn't. I just couldn't. There were a lot of hard feelings all around."

Nicholas left and started Broadcom out of his bedroom. It grew--moving from his house to small offices in Westwood to larger facilities in Irvine.

Nicholas eventually persuaded Samueli to leave PairGain, go on academic leave and join him fulltime at Broadcom in 1995.


To follow Henry Nicholas is to run. A lot. The man doesn't wait for elevators, preferring to bolt up stairs. He doesn't politely hold doors open but breezes through them. Keep up or get out.

To follow Henry Samueli is to sit. And listen. He is the professor with an open-door policy, the confidant who gets people to tell him things they shouldn't.

"I met [Samueli] and found myself trying to impress him," recalls Jeff Thermond, president and CEO of Epigram Inc., a high-tech company in Northern California that Broadcom bought in April. "Everything came spilling out. Afterward, my staff and I sat around the table and wondered, 'What the heck just happened?' "

That balance between the rash and the rational makes Nicholas and Samueli a formidable team. Samueli inspires the engineers; Nicholas drives them to win. Yet the two men often work independently. Samueli handles the technology of Broadcom and nurtures the hundreds of technologists who research and develop the chips. Nicholas, the public face of Broadcom, runs the business side.

For both, days start just after dawn and can stretch well into the night. Daytime is filled meeting with customers and sealing deals. With dusk comes the "real work"--talks with staff, visits to the lab, brainstorms about technology. Sometimes, even 20-hour days aren't long enough.

"Once you're here, failure is not an option," Nicholas says. "You're going to be here until midnight. You're going to work long hours. We have a culture that sometimes can appear to be abusive."

On a recent evening, the engineers walk into Nicholas' office with dread. It's late, around 10, but they are too scared to be tired. They must explain to Broadcom's "bad cop" why they can't fix a problem on a top-priority chip--and why a rival can.

These men all are PhDs. Anywhere else, they'd be stars, treated with fawning respect. But not here.

Ten minutes into the explanation, Nicholas growls: "Why can't we fix this very simple thing? Tell me. Right now."

One engineer, referring to a slide on the overhead projector, tries to dismiss the problem as insignificant.

Nicholas interrupts: "That's not an answer. We're slacking. Whose fault is that?"

The engineer's face is calm, his brown eyes gazing steadily at his boss. Only his hand--shaking so violently the Mont Blanc pen nearly slips from his fingers--gives away any distress. Finally, he answers: "Ours."

Then, silence, thick and nearly unbearable. The phone rings. Nicholas leaves.

"He's being gentle because you're here," the engineer says to me. "Thank you."

No one, however, is shocked by such treatment. Before joining Broadcom, people are warned about the company's culture, of Nicholas' wrath, of what happens if you fail to beat a competitor. Rivals are the "enemy." The marketplace is "a battleground." Nicholas is a self-described "autocrat."

Yet winning this high-tech war seems as if it's starting to take its toll on Nicholas and his family. After dozens of interviews, held at all hours of day and night, Nicholas finally--albeit briefly--sets aside the public mask of confidence to voice his concerns.

It's 1:30 a.m. He's just turned 40--at his desk, in a dimly lit office. He hasn't seen his wife and children, "my reason for living," for several days.

"I miss them," Nicholas says. "The last time we talked, [Stacey] told me she misses the old days, when I was at TRW and we lived in a condo. She told me she wants to go back to that life."

But they can't go back, because he can't let up. It doesn't matter how hard he and Broadcom's engineers work or how smart they all are. All that matters is the result. All that matters is winning.

And it's starting to alarm the people who love Nicholas the most. Family members and close friends say they have approached him privately, voicing concern about his work schedule and pleading with him to scale back.

He won't. Or he can't.

"I could go in and be a big cheerleader and make everyone feel good about themselves and have a fabulous time," Nicholas says. "But for [all of ] us to have expended all that time away from our families--all that time of our lives which can never be reclaimed--and to not have that chip design in and to not win would be a failure."


The payoff, of course, is two-fold: changing the world and getting rich. Compared to those in Silicon Valley, salaries are notoriously low at Broadcom, even for the much-coveted engineers who regularly receive--and reject--poaching calls from the competition. All full-time employees, however, have fat stock options--the secretaries, the sales force, even Nicholas' personal trainer, who joined the Broadcom payroll to build the company gym and stock the cafeteria with low-fat snacks. Broadcom has turned more than 500 employees into multimillionaires.

"The work is amazing, probably some of the best I'll ever do," says one Broadcom employee who requested anonymity. "But the stock keeps us here."

With high-tech stock come wealth and fame. Gates is a star--a squishy, Davy Jones kind of pop icon whose face sells books and made-for-TV screenplays. Apple's Jobs is Brian Wilson, a troubled genius making a comeback. Oracle's Larry Ellison, the notorious playboy known for racing boats and breaking hearts, continues to be the Robert Plant of Silicon Valley.

Today, there is Nicholas and his penchant for drama, such as when he gave stock worth $1.28 million to UC Irvine's Intercollegiate Athletics Department. The gift--the largest ever received by the department in its 34-year history and worth more than one-fourth of the department's annual budget--was slated for one team. Having rowed at UCLA, Nicholas picked the crew team.

As boats gleamed in Newport Harbor, Nicholas arrived to make the donation official. Camera crews raced to grab shots of him shaking hands with the coach. He greeted the team, all burly youngsters with the kind of safe, suburban look that comes from years spent shopping at malls. The conversation between the man and the boys turned to the team's training schedule. Suddenly, Nicholas challenged them.

"I bet I could do more pull-ups than some of you," he said.

Onlookers laughed politely at the billionaire's comment. How witty.

But Nicholas was serious. He offered to add $1,000 to the donation for every pull-up "you can do more than me. . . . Remember, I'm an old man."

Team captain Al Boloorian stepped forward and led the older man to a nearby chin-up bar. The burly 21-year-old, who was on his summer vacation, glanced at the lanky Nicholas and grinned. Easy, easy money.

Stepping under the steel bar, Nicholas eagerly stripped off his navy suit jacket and wool vest, his red silk tie, his crisp white shirt with initials monogrammed in light blue on the starched cuffs. Boloorian stared at Nicholas' rippling torso and stopped smiling. Muscles bulged everywhere, a bodybuilder's physique hiding beneath the tailored suit.

The two men began their pull-ups. Boloorian dropped after 11.

Nicholas did 27. The crowd flocked around him with congratulations.

Nicholas shook Boloorian's hand, smiled graciously at the college student and accepted the crowd's adulation with a quiet modesty.

Except, really, none of this is a surprise. Nicholas had asked for only one thing in exchange for the 10,000 shares of Broadcom stock: a pull-up contest against one of the guys on the UCI crew team--preferably in front of an audience.

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