Broadcom Stock Pays Off for Execs
With Broadcom Corp.’s stock price booming, 10 insiders at the Irvine computer chip developer are cashing in on the company’s spectacular Wall Street performance by selling stock worth at least $252 million.
Co-founders Henry T. Nicholas III and Henry Samueli, four vice presidents, three board directors and the company’s chief financial officer sold small parts of their Broadcom holdings between Oct. 21 and Nov. 30, according to documents filed with federal regulators.
The sales began just days after Broadcom reported that its third-quarter profit soared fivefold and sales more than doubled. The trading reflects a continuing effort by top managers to diversify their assets, said William Ruehle, Broadcom’s chief financial officer.
The timing of the sales occurred during a narrow window of opportunity that company insiders are allowed for selling their shares, said Ruehle, who sold 45,000 shares himself for a gross of $6.1 million to $7.3 million.
“We don’t allow insiders 1/8to sell 3/8 during the last month of the quarter, and not until a few days after our earnings are reported,” Ruehle said. “That’s why you won’t see any of our managers selling their shares during the month of December.”
Following the rules cost the executives millions of dollars. Broadcom’s stock has jumped from $207.75 a share on Nov. 30 to a 52-week high of $282.38 a share during trading Tuesday. It settled back to close at $269.19 a share Tuesday, up $19.19.
Broadcom’s market capitalization--the total value of its shares outstanding--also has exploded from $18.6 billion at the end of November to $28 billion Tuesday.
Broadcom employees earn a cash salary that is lower than what they could make at a rival company, according to documents filed with the Securities and Exchange Commission.
The real compensation comes in the form of stock options.
The company’s generous employee stock option program has created more than 500 millionaires on paper.
“If all your net worth is tied up in the shares of one investment, it makes sense to diversify a bit,” Ruehle said.
Employee compensation experts agree. They note that executives sold only a small portion of the total shares they hold. Nicholas, for example, sold a total of 834,725 shares for at least $104.2 million through his family trust. Samueli, both on his own and through his family trust, sold a total of 796,500 shares for a gross of at least $106 million.
Both men, however, each still control more than 18.8 million Broadcom shares, according to regulatory filings, making each man worth more than $5 billion on Tuesday.
“Given how well the stock has performed, they’re smart to exercise their options and lock in the gains,” said Carl Schmitt, vice president of WestWard Pay Strategies, a Bay Area consulting firm that specializes in compensation matters for high-tech firms.
“If you look at Bill Gates or 1/8America Online’s 3/8 Steve Case, they sell shares all the time,” Schmitt said. “But compared to what 1/8Gates and Case are 3/8 holding, what they’re selling is nothing.”
Other Broadcom sellers included board directors Werner F. Wolfen, Myron S. Eichen and Alan E. Ross.
Wolfen sold 10,000 shares at $129.94 a share and 29,462 shares at $136.25 to $149.75 a share. Eichen sold 18,000 shares at $114.82 a share and 24,000 shares at $138.29 to $158.30 a share. Ross sold 24,900 shares at $115.50 to $128.27 a share.
