Broadcom to Take Options-Related Charge

Broadcom Corp., the world’s largest manufacturer of high-speed modem chips, said Monday that it will take a charge of as much as $238 million in the second quarter to pay for its decision to let employees exchange stock options that have become worthless as the company’s stock has plummeted in value during the last 2 1/2 years.

The Irvine-based chip maker said the move is designed “to help ... retain and incentivize employees.” Its shares traded as high as $274.75 in August 2000 but closed Monday at $13.49 after rising 36 cents on Nasdaq.

Eligible employees who have options to buy Broadcom stock exercisable at $23.58 a share or more will be allowed to exchange those options for new shares or new options. The company said 57 million options are eligible for exchange, but the amount of the charge will depend on the number of shares swapped.

Broadcom “is probably doing what they have to do. The alternative is to have to pay people in cash,” said Arnab Chanda, a semiconductor analyst with Lehman Bros. who does not own Broadcom stock.

Employees with options that have vested can exchange them for a smaller number of regular shares. Employees whose options have not yet vested can trade them in for an equal or lesser number of new options. The strike price for those options will be the same as the closing share price in six months.

Broadcom has posted 10 straight quarters of losses, but acting Chief Executive Alan E. “Lanny” Ross has pledged to bring the company back into the black this year. Ross took over in January, when co-founder and CEO Henry Nicholas resigned abruptly, citing family reasons.

Broadcom reports first-quarter results April 16.

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Bloomberg News was used in compiling this report.