New Broadcom CEO Hopes to Stem Losses
The departure this week of Broadcom Corp.’s flamboyant and hard-driving chief executive, Henry T. Nicholas III, leaves a vacuum at the Irvine-based communications chip maker at a time when the company is struggling to regain profitability in a difficult market.
But Alan E. “Lanny” Ross, who shed his title of chief operating officer to step in as interim CEO, said Friday that his top priority was to put an end to Broadcom’s streak of 10 straight quarters of red ink by producing a profit in the current period.
“That’s our No. 1 imperative,” Ross said in an interview.
On Thursday, Broadcom reported a fourth-quarter loss of $1.76 billion, far worse than the $330-million quarterly deficit posted a year earlier. For all of 2002, the company lost more than $2.2 billion.
Broadcom stock sank $2.50 to $15.11 on Nasdaq on Friday. The stock had traded as low as $14.86 during the day. Shares are up 56% from a low of $9.70 in October, though they nose-dived 51% in 2001 and 63% in 2002.
Nicholas’ resignation from the company he co-founded in 1991 took the industry by surprise. Broadcom watchers also were puzzled that co-founder and Chief Technical Officer Henry Samueli would not be the one taking his place.
But Ross, who plans to serve as CEO for just three to six months, said Samueli wasn’t suited for the job.
Samueli “is the professor, the confidant, the scientist’s scientist,” Ross said. “As a tech talent, he’s a giant. But a typical CEO requires a broader range of skills than he’s acquired during his time.”
Samueli was not available for comment Friday.
Nicholas’ decision to step down came only in the last week. It was over a dinner of sea bass at Chanteclair in Irvine on Tuesday that Nicholas, 43, told Ross, Samueli and outside board member Werner Wolfen that he was going to devote himself full time to his family.
Nicholas’ wife, Stacey, filed for divorce in October, seeking custody of their three children. Nicholas said Thursday that he held out hope for a reconciliation and wanted to dedicate his time to his family.
Salomon Smith Barney analyst Clark Westmont compared Broadcom without Nicholas to the U.S. 3rd Army without Gen. George Patton. He rates Broadcom as “underperform.”
Nicholas was “a great motivator and in many ways drove the intensely competitive culture of the company,” said Merrill Lynch & Co. analyst Mark Lipacis, who downgraded Broadcom to a “sell” rating Friday. “With the departure of such a strong leader, the company will undergo a cultural change, if not a bit of a leadership vacuum.”
Neither analyst owns Broadcom stock. Salomon Smith Barney doesn’t do business with Broadcom. Merrill Lynch would not disclose whether Broadcom is a client but said it regularly seeks business relationships with the companies it covers.
Besides the goal of returning the firm to profitability, Ross said, he wants to expand Broadcom’s sales and marketing organizations in Asia. China alone could generate a revenue stream of $1 billion annually, he said.
A torrent of new products this year also will help Broadcom get back on its feet, Ross predicted. Among these is a chip that will pack all the electronics needed to run television sets based on cathode ray tubes, liquid crystal displays or plasma screens.
Ross, 67, said that once a new CEO is found, he would “go back to retirement.” He retired once, as president of Rockwell International Corp.’s telecommunications group in 1995, when he joined Broadcom’s board. He became the company’s chief operating officer on an interim basis in November. He said he expected to remain a director for the foreseeable future.
Times staff writer P.J. Huffstutter contributed to this report.
