Broadcom's Chief Steps Down

Times Staff Writer

Broadcom Corp. Chief Executive Henry T. Nicholas III, the brainy, swashbuckling billionaire who championed Orange County as a high-tech center, resigned Thursday from the communications chip company he co-founded in Irvine in 1991.

Though Broadcom has hemorrhaged billions of dollars over the last three years as the technology sector has crumbled, Nicholas said he decided to step down from the job that made him a business celebrity because of "serious family matters," including his pending divorce.

Best known for his enormous ego, intense work style and the extravagant parties at his sprawling Laguna Hills mansion, the 43-year-old Nicholas became synonymous with both the success and excess of the Internet Age.

Broadcom's once-soaring stock price not only put him on the Forbes list of the richest Americans, it made millionaires of hundreds of employees after the company went public in 1998. At the height of the tech boom, it was not uncommon to see Ferraris and Lamborghinis in the company parking lot.

But Nicholas craved more. Along with Broadcom co-founder Henry Samueli, he made an unsuccessful bid to buy a minority stake in two Anaheim sports franchises, the Angels baseball team and hockey's Mighty Ducks. He donated millions to the Orange County Performing Arts Center, South Coast Repertory, the UC Irvine crew team and various charities for children. He lobbied local colleges to be more aggressive in teaching engineering. And he touted Orange County as the next Silicon Valley every chance he could.

Nicholas also earned a reputation as a corporate tyrant, prone to calling 1 a.m. staff meetings and shouting at employees who failed to provide correct answers to arcane technical questions. He annoyed neighbors with loud parties that featured live rock performances in his backyard and peeved city officials by digging a secret passageway under his home without getting the necessary permits.

Nicholas continued to live larger than life, even as the tech bust slashed demand for Broadcom's chips. The company has shed about 600 workers since 2000 and currently has a worldwide staff of about 2,500.

Ultimately, though, the demands of running the company affected Nicholas' personal life.

Leaning calmly against a dark wood table in a conference room at company headquarters Thursday, he told Wall Street analysts that he had taken time off in December and this month to try to patch up his marriage.

He has been separated from his wife of 15 years, Stacey E. Nicholas, since March. She filed for divorce in October, seeking custody of their three children, according to court records.

"Even though there are no guarantees, I have the opportunity to get my wife back," Nicholas said. "Stacey doesn't believe that I'll be able to make family my No. 1 priority.... It's an experiment I look forward to performing.

"And I love the challenge."

Stacey Nicholas, 38, could not be reached for comment.

The news marks a dramatic career twist for the entrepreneur who hinged his company on the belief that all electronic appliances -- every phone, every computer, every TV, even every refrigerator -- would be able to talk to one another.

The vision has largely come to pass. Consumers can point a remote at the TV to watch sports or surf the Web, or use a cell phone to send e-mail or play a video game.

Broadcom's goal was to make its communication chips the glue that binds all of these machines together. But lately, the company has fallen short.

Broadcom reported its 10th straight quarterly loss Thursday as its fourth-quarter deficit widened considerably to $1.76 billion, or $6.40 a share, compared with a loss of $329.6 million, or $1.27 a share, in the final quarter of 2001. Revenue increased 30% to $295.9 million from $226.8 million.

While it made a profit of $72.4 million in 1999, it lost $688 million in 2000, $2.7 billion in 2001 and $2.3 billion in 2002.

Broadcom recorded three big charges in the latest quarter: $1.24 billion for goodwill impairment, $282 million to increase reserves against deferred taxes, and $88 million for restructuring.

Broadcom shares, which were up 77 cents to $17.61 in regular Nasdaq trading, plunged to $16 in after-hours trading, after the company's earnings report and the announcement of Nicholas' resignation. The stock tumbled 51% in 2001 and 63% in 2002.

Broadcom Chief Operating Officer Alan E. Lanny Ross, who has been on the board since 1995, will serve as chief executive during the search for a permanent replacement, the company said.

"The whole segment's been under a tremendous amount of pressure," said Ron Enderle, a technology analyst with the Giga Information Group. "It's not surprising ... that a CEO would leave" after 10 straight quarters of losses.

Yet analysts still express admiration for Broadcom.

"In an environment of the ever-shrinking semiconductor company, Broadcom stood out," said Alex Gauna, a director with UBS Warburg who does not own any of the company's stock. "Their corporate culture did not crack. And much of that is because of Nicholas."

Born in Cincinnati, Nicholas earned his bachelor's and master's degrees and a doctorate in engineering at UCLA. There he met Samueli, who was a professor. When Broadcom went public in 1998, the two men became multimillionaires overnight.

The company's stock, which was priced at a split-adjusted $6 a share for its trading debut, more than doubled the first day. The duo each received $6.5 million by selling stock, and their then-combined 56% remaining stake in the chip maker was worth nearly $1.25 billion.

Nicholas' net worth peaked in 1999 at $2.6 billion, according to the Forbes 400 list. The shares he owns and controls are currently worth $565 million, according to filings with the Securities and Exchange Commission.

At first, the little-known company and its team of engineers were baffled by the wealth. But Nicholas quickly found ways to spend it.

He picked up a Harley-Davidson, a gleaming red Ferrari, and a black Lamborghini that growls even in first gear. There also were new cars for his relatives: a Mercedes for his parents, a Cadillac for his mother-in-law.

And then there was the house. Nicholas' mansion -- 15,000 square feet on an acre with a godlike view of Orange County -- contains several million dollars worth of computers. With its vaulted ceilings, waterfalls, two pools, underground grotto, expansive wine cellar, private sports bar and hidden doors that open with secret levers, the two-story palace is the home every gadget-lover dreams about.

Nicholas became the face of Broadcom, and a brash one at that. Prospective employees are warned about the company's intense nature, of Nicholas' wrath, of what happens if they fail to beat a competitor. Rivals were known as the "enemy," the marketplace "a battleground."

Burnout was inevitable, even for Nicholas. He said the decision to leave came two weeks ago, when he underwent an outpatient surgery to remove a benign cyst from his left sinus.

Though the divorce paperwork had already been filed, Stacey evidently agreed to let her husband recuperate with her.

"I know you won't believe me, but I spent three days unable to talk," Nicholas said. "This had the unintended effect of turning me into a very good listener."

Times staff writers Terril Yue Jones, Monte Morin and David Haldane contributed to this report.

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