Irvine-Based Broadcom Acquires Armedia
Moving to broaden its consumer base and strengthen its engineering staff, Broadcom Inc. said Tuesday that it bought a maker of digital video decoders with facilities in India for $67.2 million in stock.
Irvine-based Broadcom, the world’s leading maker of cable-modem chips, expects to issue 702,000 Class B shares to buy Milpitas, Calif.-based Armedia Inc. The bulk of Armedia’s 45-person staff--including nearly all of its engineers--works in Bangalore, home to more than 200 high-tech firms and a city many industry analysts call the Silicon Valley of India.
The deal, which closed Monday, marks Broadcom’s third acquisition in the last six months.
“Broadcom is an engineering-driven company, and one of their biggest battles is finding good talent,” said Michael Wolf, an industry analyst for Instat, a research group based in Scottsdale, Ariz.
“The supply of engineers based in the United States, as well as the number of engineers that can come here on a work visa, has not met the demand. This is one way to work around that problem,” Wolf said.
The race to hire coveted engineers from other nations has been a hotly contested issue between the computer industry and labor advocates, who argue that the high-tech world uses foreign workers as a cheap alternative to retraining U.S. citizens.
The state’s technology companies last year rallied behind the H-1B visa allocation program, a federal legislative effort that was designed to ease what industry sources describe as a severe shortage of qualified engineers and computer programmers.
Although Congress lifted the cap from 65,000 to 115,000 working visas for high-tech employees after Microsoft Corp. and scores of Silicon Valley firms urged the increase, industry watchers say the yearly allotment probably won’t be enough.
Broadcom’s acquisition of privately held Armedia also gives the Irvine company access to a new cable-friendly market, said Jeff Lipton, a financial analyst with Hambrecht & Quist.
“There are 15 million to 20 million homes with cable in India right now, not to mention all the homes that will have an appetite for the rest of Broadcom’s products,” Lipton said. Broadcom “has a lot of currency right now, and this deal makes a lot of sense for them.”
Broadcom officials declined to say what kind of products the company will develop with Armedia, whose digital-video decoders let computers play videos downloaded from a network such as the Internet. The decoders use technology that works with Broadcom’s cable modems and TV set-top boxes.
Broadcom closed the Armedia deal on Monday, as well as its previously announced acquisitions of Epigram Inc. in Sunnyvale and Maverick Networks in San Jose, giving the Irvine company a broader spectrum of high-speed networking technology for homes and small offices.
Broadcom will continue this acquisition trend, particularly targeting companies “for their technology capabilities, rather than focus on the size of their revenue stream,” said William J. Ruehle, Broadcom’s chief financial officer.
All three of the deals were paid in stock. The Maverick acquisition, announced in January, was valued at the time at about $104 million; Epigram, announced in April, was pegged this spring at about $316 million.
Broadcom shares have almost quadrupled in the last year as the company beat analysts’ earnings estimates on strong demand for its digital television set-top box chips. Taking advantage of its strong stock, Broadcom has issued 6.36 million Class B shares for the three transactions.
The company has 99.1 million shares outstanding and, as of Tuesday, a market capitalization of $9.1 billion. Broadcom’s stock on Tuesday fell $2.69 a share to $93.06 on the Nasdaq market.
