Broadcom Boom to Spawn a 2nd Stock Offering
Hoping to take advantage of Wall Street’s insatiable appetite for Internet stocks, Irvine-based Broadcom Corp. said Wednesday that it plans a secondary stock offering, less than six months after going public.
The unusually quick return to the market has been prompted by a nearly 300% increase in Broadcom’s stock over the past five months and the desire of some of the company’s early investors to cash in.
Broadcom will offer 3.45 million shares, only 10% of which will be new shares. The remainder are being sold by existing shareholders.
Founders Henry T. Nicholas III and Henry Samueli, who each reaped $6.5 million before taxes in the initial public offering in April, each plan to sell another 450,000 shares in the secondary offering, sources said. At Wednesday’s closing price of $71, each would gross an additional $31.9 million.
Broadcom said it will receive at least $26.2 million in net proceeds, based on Wednesday’s close.
Some of Broadcom’s major customers--Intel Corp., Scientific-Atlanta Inc., General Instrument and Cisco Systems--also own stock in the company. All are expected to sell a portion of their holdings.
Broadcom officials would not say Wednesday when the secondary offering will be made, but analysts expect it to occur in the next two to four weeks when regulatory restrictions preventing Nicholas and Samueli from selling additional shares will be lifted.
Broadcom, which makes computer chips that speed up Internet transmissions over ordinary phone and television lines, went public in April at $24 and saw its shares skyrocket to $53.63 in first-day trading on the Nasdaq.
The company’s stock has been volatile since then, rising and falling with the fortunes of other Internet and cable-related companies. Broadcom traded as high as $90 last week--an all-time high. But on Wednesday, it dropped $6 a share, or nearly 8%.
Analysts say it is unusual for a company, even one doing as well as Broadcom, to return to the market so quickly after an initial offering. In the red-hot IPO market of 1996, two Orange County companies made secondary offerings within a year of going public. Since then, sunglasses maker Oakley Inc., whose stock soared from $23 to around $50 before splitting, has seen its shares fall to the $10 range. And wheel manufacturer Boyds Wheels Inc., which burned through most of its cash in an ill-timed expansion, filed for bankruptcy reorganization earlier this year. Its stock was bid Wednesday at 32 cents.
Broadcom has reported strong earnings growth since going public. For the first half of the year, the company earned $15.4 million, or 35 cents a share, compared with a $1.8-million loss, or 7 cents a share, for the first half of 1997. Revenue surged more than sevenfold, to $80.5 million, from $10.4 million a year earlier.
On Wednesday, Broadcom said it is building on this upward trend. The company expects to earn 16 or 17 cents a share, or about $52.5 million, in the third-quarter, which ended Wednesday, beating analysts’ expectations by about 7%.
Last month, Broadcom unveiled a new chip containing cable-modem circuitry that used to be divided among three chips. The company said the single chip will reduce the cost of home equipment and next-generation cable modems.
In the company’s initial public offering in April, Broadcom and five shareholders sold 3.5 million shares, raising $78.1 million.
Also on Wednesday, Broadcom said Scientific-Atlanta plans to sell 600,000 shares of Broadcom Class B stock. These shares are the same as Broadcom’s Class A stock except for certain voting restrictions.
