Broadcom Shares Gain 123% in Initial Offering
In the most stellar stock-market debut of the year, shares of Irvine-based chip maker Broadcom Inc. nearly tripled in value before settling back a notch and making its founders multimillionaires.
The trading frenzy put the value of Broadcom, a little-known company with $37 million in sales last year and visions of putting the Internet on home television sets, at more than $2.3 billion.
Priced at $24 a share, the first public offering of Broadcom shares hit a peak of $70 on Friday before closing at $53.63 in Nasdaq trading, up $29.63. The company issued 3.5 million shares.
Founders Henry T. Nicholas III and Henry Samueli still own 56% of Broadcom--holdings worth $650 million each by day’s end.
That amount would rank the two executives below only billionaire land baron Donald L. Bren of the Irvine Co. and Getty Oil heiress Anne Catherine Getty-Earhart of Laguna Beach as Orange County’s richest residents.
They even eclipsed David Sun and John Tu, the celebrated Kingston Technology Corp. entrepreneurs who gained national fame for setting aside $100 million for employee bonuses after Kingston went public two years ago.
“It’s just so overwhelming what Henry and Nick have done. It’s still so unreal to me,” said Nicholas’ wife, Stacey.
Broadcom’s chips speed up Internet transmissions over ordinary phone and television lines not originally intended to carry high-speed digital signals.
The aim of the “two Henrys,” as the founders are known at the company, is to put the Internet on the televisions of average Joes and Janes around the world, an immodest goal that analysts say may be achievable--and a story that investors found irresistible.
Broadcom’s closing price was about five times the amount that the company and its underwriters originally had estimated the shares would bring. “It’s the hottest deal of the year,” said Ryan Jacob, manager at the Internet Fund in New York.
The run-up underscores investors’ apparently bottomless taste for Internet-related companies. Jacob said there have been at least four other “moon shot” stock offerings over the last year in which shares of such firms roughly doubled in the first day of trading.
But Broadcom is a particularly compelling story, analysts say, because it already has a steady and growing stream of sales--something many Internet firms can only dream about. Founded in August 1991, it has generally operated at a profit since 1993, though it lost $1.2 million last year.
Nicholas, Broadcom’s chief executive, predicted last fall that sales would reach $1 billion by the millennium. “We won’t be on your small-companies list,” he boasted to Forbes magazine.
He and Samueli, the company’s chief engineer, declined any comment on Friday, citing government regulations imposing a “quiet period” on companies selling stock.
At Broadcom’s Laguna Canyon Road offices, employees drank champagne as phones rang nonstop with congratulatory calls.
“I don’t think anyone is really surprised that it’s done so well,” said Eileen Ohnell, who follows new stock offerings for Renaissance Capital Corp. in Greenwich, Conn.
“They have a number of products across a number of interesting markets,” she said. “The business is very real, and they’re already just about at break-even.”
Broadcom’s opening was even more impressive because it came on a day when many Internet stocks lost ground, after soaring all week.
Broadcom’s semiconductors for high-speed data transmission are used in devices such as cable TV boxes, cable modems and digital satellite signal decoders.
Its customers include major technology companies such as 3Com Corp. and Motorola Inc. Investors like the fact that several customers, including Cisco Systems Inc., General Instrument Corp. and Scientific-Atlanta Inc., are part owners in the company, Jacob said. Intel Corp. also owns a stake.
Samueli, 43, has been an electrical engineering professor since 1985 at UCLA, where he was Nicholas’ advisor on a doctorate program. Nicholas, 38, a 6-foot-6 sometime bungee jumper, worked with his former mentor at TRW Inc. in the early 1980s designing super-fast circuits for the military.
Samueli later helped start PairGain Technologies Inc., a Tustin maker of telecommunications gear. Nicholas was PairGain’s director of microelectronics.
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Times correspondent Leslie Earnest, librarian Lois Hooker and Bloomberg News contributed to this report.
